3C TAX Part 2 Digest Consolidated-SEMI COMPLETE

San Beda College of Law|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-00146-64-B, 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 for 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 19811985 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. Page 1 of 50
Relative to the two other issued raised by the Commissioner, we need only quote from Executive Order No. 41 itself; thus: 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 nonpayment 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, quasi-judicial 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 December 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, issued 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 Page 2 of 50
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. 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 filed 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 Page 3 of 50
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 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
G.R. NO. L-52306 OCTOBER 12, 1981; MELENCIO-HERRERA, J.
FACTS: - During the period pertinent to this case, petitioner corporation was engaged in the business of telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or business within the Philippines. for which petitioner paid rentals after withholding income tax of 30%of one-half of the film rentals. In so far as the income tax on non-resident corporations is concerned, sec. 24 (b)of the NIRC, used to provide: (b) Tax on foreign corporations.(1) Non-resident corporations. There shall be levied, collected, and paid for each taxable year, in lieu of the tax imposed by the preceding paragraph, upon the amount received by every foreign corporation not engaged in trade or business within the Philippines, from an sources within the Philippines, as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, a tax equal to thirty per centum of such amount. -On April 12, 1961, in implementation of the aforequoted provision, the Commissioner of Internal Revenue issued General Circular No. V-334, wherein an income tax equal to 30% is levied upon the amount received by every foreign corporation not engaged in trade or business within the Philippines from all sources within this country and . The local distributor should withhold 30% of one-half of the film rentals paid to the non-resident foreign film distributor and pay the same to this office in accordance with law unless the non- resident foreign film distributor makes a prior settlement of its income tax liability -petitioner dutifully withheld and turned over to the Bureau of Internal Revenue the amount of 30% of one-half of the film rentals paid by it to foreign corporations not engaged in trade or business within the Philippines. The last year that petitioner withheld taxes pursuant to the foregoing Circular was in 1968. Page 4 of 50
-Then, Act No. 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30 % to 35 % and revising the tax basis from "such amount" referring to rents, etc. to "gross income; thereafter, the Commissioner of Internal Revenue issued Revenue Memorandum Circular No. 471, revoking General Circular No. V-334, and holding that the latter was "erroneous for lack of legal basis," because "the tax therein prescribed should be based on gross income - On the basis of this new Circular, respondent Commissioner of Internal Revenue issued against petitioner a letter of assessment and demand dated April 15, 1971, but allegedly released by it and received by petitioner on April 12, 1971, requiring them to pay deficiency withholding income tax on the remitted film rentals for the years 1965 through 1968 and film royalty as of the end of 1968 - petitioner requested for a reconsideration and withdrawal of the assessment. However, without acting thereon, respondent, on April 6, 1976, issued a warrant of distraint and levy over petitioner's personal as well as real properties. - petitioner then filed its Petition for Review with the Court of Tax Appeals butthe latter denied it ISSUE: IWhether or not respondent can apply General Circular No. 4-71 retroactively and issue a deficiency assessment against petitioner in the amount of P 525,897.06 as deficiency withholding income tax for the years 1965, 1966, 1967 and 1968. HELD: NO Sec. 338-A. Non-retroactivity of rulings. Any revocation, modification, or reversal of and of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner of Internal Revenue shall not be given retroactive application if the relocation, modification, or reversal will be prejudicial to the taxpayers, except in the following cases: (a) where the taxpayer deliberately mis-states or omits material facts from his return or any document required of him by the Bureau of Internal Revenue: (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith. (italics for emphasis) It is clear from the foregoing that rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive application where to so apply them would be prejudicial to taxpayers. The prejudice to petitioner of the retroactive application of Memorandum Circular No. 4-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. Petitioner was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and no longer had any control over them when the new Circular was issued. And in so far as the enumerated exceptions are concerned, admittedly, petitioner does not fall under any of them. - It provides that "the re-enactment of a statute substantially unchanged is persuasive indication of the adoption by Congress of a prior executive construction.
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- the Government is never estopped from collecting taxes because of mistakes or errors on the part of its agentsbut this also admits of exceptions in the interest of justice and fairplay 97. Villanueva PHILIPPINE BANK OF COMMUNICATIONS v CIR 98. Querido CIR V TOKYO SHIPPING CO., ltd 99. Pambid REYES V ALMANZOR G.R. Nos. L-49839-46 April 26, 1991 PARAS, J. Facts: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. The National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite period. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on the schedule of market values duly reviewed by the Secretary of Finance. Petitioners filed a Memorandum of Disagreement with the Board of Tax Assessment Appeals. The Board of Tax Assessment Appeals, however, considered the assessments valid. The Reyeses appealed to the Central Board of Assessment Appeals which affirmed the decision of BTAA. Issue: WON the Honorable Board erred in adopting the Comparable Sales Approach Method in the assessed value of appellants properties Held: Yes. Not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property. Nothing can justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were comparable with other residential properties not burdened by P.D. 20. Neither can the given circumstances be nonchalantly dismissed by public respondents as imposed under distressed conditions clearly implying that the same were merely temporary in character. At this point in time, the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has existed for around twenty (20) years with no ento it in sight. Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same Page 6 of 50
government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties 100. Crespo 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 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. 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. 4 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. The CTA found that the protest was filed on time. Hence, CIR appealed the decision of CTA. Issue: WON the letter of protest was filed on time Held: Yes. 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. As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was not pro forma and was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, 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 on April 23, 1965, only 20 days of the reglementary period had been consumed. The appealed decision of CTA is affirmed. 101. Rosalejos PHILEX MINING CORP VS CIR G.R. No. 125704 Page 7 of 50
August 28, 1998 ROMERO, J. Facts: On August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992 in the total amount of P123,821.982.52. Philex protested the demand for payment of the tax liabilities stating that it has pending claims for VAT input credit/refund for the taxes it paid for the years 1989 to 1991 in the amount of P119,977,037.02 plus interest. Therefore these claims for tax credit/refund should be applied against the tax liabilities. BIR denied the demand for set-off. Philex then raised the issue to CTA. BIR then issued a Tax Credit Certificate reducing its tax liabilities. Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay the remaining balance of P110,677,688.52 plus interest. Philex then appealed to the CA which dismissed its petition. However, a few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994. In view of the grant of its VAT input credit/refund, Philex now contends that the same should, ipso jure, off-set its excise tax liabilities since both had already become "due and demandable, as well as fully liquidated;" hence, legal compensation can properly take place. Issue: WON there can be a valid set-off Held: No. In several instances prior to the instant case, we have already made the pronouncement that taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity. We find no cogent reason to deviate from the aforementioned distinction. Revenue v. Itogon-Suyoc Mines Inc., wherein we ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet been approved by the Commissioner, 21 is no longer without any support in statutory law. It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d) of the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the same provision upon which the Itogon-Suyoc pronouncement was based was omitted. 22 Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex. 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: Page 8 of 50
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 Sale 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. 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. Page 9 of 50
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 G.R. NO. 59068 January 27, 1983 DE CASTRO, J.: FACTS: 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 Page 10 of 50
July 11, 2009 Facts: S.C. JOHNSON AND SON, INC., a domestic corporation organized and operating under the Philippine laws, entered into a license agreement with SC Johnson and Son, United States of America (USA), a non-resident foreign corporation based in the U.S.A. For the use of the trademark or technology, [respondent] was obliged to pay SC Johnson and Son, USA royalties based on a percentage of net sales and subjected the same to 25% withholding tax on royalty payments which [respondent] paid for the period covering July 1992 to May 1993 in the total amount of P1,603,443.00.Respondent filed with the International Tax Affairs Division (ITAD) of the BIR a claim for refund of overpaid withholding tax on royalties. The Commissioner did not act on said claim for refund. Private respondent S.C. Johnson & Son, Inc. (S.C. Johnson) then filed a petition for review before the Court of Tax Appeals (CTA).The Court of Tax Appeals rendered its decision in favor of S.C. Johnson and ordered the Commissioner of Internal Revenue to issue a tax credit certificate. The Commissioner of Internal Revenue thus filed a petition for review with the Court of Appeals which rendered the decision finding no merit in the petition and affirming in toto the CTA ruling.Thus, this petition. Issue: Whether the Court of Appeals erred in ruling that SC Johnson and Son, USA is entitled to the Most Favored Nation Tax rate of 10% on Royalties as provide in the RP-US Tax Treaty in relation to the RP-West Germany Tax Treaty? Held: The royalty income of a German resident from sources within the Philippines arising from the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, is taxed at 10% of the gross amount of said royalty under certain conditions. The rate of 10% is imposed if credit against the German income and corporation tax on said royalty is allowed in favor of the German resident. That means the rate of 10% is granted to the German taxpayer if he is similarly granted a credit against the income and corporation tax of West Germany. The clear intent of the matching credit is to soften the impact of double taxation by different jurisdictions. The RP-US Tax Treaty contains no similar matching credit as that provided under the RPWest Germany Tax Treaty. Hence, the tax on royalties under the RP-US Tax Treaty is not paid under similar circumstances as those obtaining in the RP-West Germany Tax Treaty. Therefore, the most favored nation clause in the RP-West Germany Tax Treaty cannot be availed of in interpreting the provisions of the RP-US Tax Treaty. 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 Page 11 of 50
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 lapsed. Such was counted from the time they have received the assessment. 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 G.R. No. L-59758 December 26, 1984 Page 12 of 50
AQUINO, J.: FACTS: In the instant case, Advertising Associates alleged that it sold in 1949 its advertising agency business to Philippine Advertising Counsellors, that its business is limited to the making, construction and installation of billboards and electric signs and making and printing of posters, signs, handbills, etc. (101 tsn). It contends that it is a media company, not an advertising company, It paid sales taxes for selling billboards, electric signs, calendars, posters, etc., realty dealer's tax for leasing billboards and electric signs and 3% contractor's tax for repairing electric signs. The billboards and electric signs manufactured by it are either sold or leased, As already stated, the Commissioner of Internal Revenue subjected to 3% contractor's tax its rental income from billboards and electric signs. The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest) on its income from billboards and neon signs. The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its primary purpose is to engage in general advertising business. Its income tax returns indicate that its business was advertising. Advertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71 deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated the assessments in his letters of July 12 and September 16,1974 (p. 3, Rollo). The taxpayer requested the cancellation of the assessments in its letters of September 13 and November 21, 1974 (p. 3, Rollo). Inexplicably, for about four years there was no movement in the case. Then, on March 31, 1978, the Commissioner resorted to the summary remedy of issuing two warrants of distraint, directing the collection enforcement division to levy on the taxpayer's personal properties as would be sufficient to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon the taxpayer on April 18 and May 25, 1978. More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 in answer to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of distraint (Annex C of Petition, pp. 31-32, Rollo). He justified the assessments by stating that the rental income of Advertising Associates from billboards and neon signs constituted fees or compensation for its advertising services. He requested the taxpayer to pay the deficiency taxes within ten days from receipt of the demand; otherwise, the Bureau would enforce the warrants of distraint. He closed his demand letter with this paragraph: This constitutes our final decision on the matter. If you are not agreeable, you may appeal to the Court of Tax Appeals within 30 days from receipt of this letter. Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, it filed its petition for review. In its resolution of August 28, 1979, the Tax Court enjoined the enforcement of the warrants of distraint. The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the Commissioner's appealable decisions. Since Advertising Associates appealed from the decision of May 23, 1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court. ISSUE: (1) Whether the collection of the tax had already prescribed. (2) Whether the petition for review was filed within the reglementary period. RULING: (1) Section 332 of the 1939 Tax Code, now section 319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax may be collected by distraint or levy or by a judicial proceeding begun 'within five years after the assessment of the tax". Page 13 of 50
The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The warrants of distraint were served upon it on April 18 and may 25,1978 or within five years after the assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period. Its enforcement was not implemented because of the pending protests of the taxpayer and its requests for withdrawal of the warrants which were eventually resolved in Commissioner Plana's letter of May 23, 1979. It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He relied on the warrants of distraint to interrupt the running of the statute of limitations. He gave the taxpayer ample opportunity to contest the assessments but at the same time safeguarded the Government's interest by means of the warrants of distraint. (2) We hold that the petition for review was filed on time. The reviewable decision is that contained in Commissioner Plana's letter of May 23, 1979 and not the warrants of distraint. No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the Commissioner's final decision within the meaning of section 7 of Republic Act No. 1125. The Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. That was the same situation in St. Stephen's Association and St. Stephen's Chinese Girl's School vs. Collector of Internal Revenue, 104 Phil. 314, 317-318. The directive is in consonance with this Court's dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in administrative action (Surigao Electric Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57 SCRA 523). 3. Goce CIR V ISABELA CULTURAL CORPORATION G.R. No. 135210 July 11, 2001 PANGANIBAN, J. Facts: In an investigation conducted on the 1986 books of account of respondent, petitioner had the preliminary finding that respondent incurred a total income tax deficiency of P9,985,392.15, inclusive of increments. Upon protest by [respondent's] counsel, the said preliminary assessment was reduced to the amount of P325,869.44. A demand was received by respondent. Respondent then filed a request for investigation. Attached were certain documents supportive of its protest, as well as a Waiver of Statute of Limitation, dated April 17, 1990, where it was indicated that [petitioner] would only have until April 5, 1991 within which to asses and collect the taxes that may be found due from [respondent] after the re-investigation. On February 9, 1995, [respondent] received from [petitioner] a Final Notice Before Seizure, dated December 22, 1994. Respondent] considered said final notice of seizure as [petitioner's] final decision. Hence, the instant petition for review filed with this Court on March 9, 1995. CTA dismissed the petition. CA reversed CTAs decision. Issue: WON the Final Notice Before Seizure dated February 9, 1995 signed by Acting Chief Revenue Collection Officer Milagros Acevedo against ICC constitutes the final decision of the CIR appealable to the CTA Held: Yes. The Final Notice Before Seizure cannot but be considered as the commissioner's decision disposing of the request for reconsideration filed by respondent, who received no other Page 14 of 50
response to its request. Not only was the Notice the only response received; its content and tenor supported the theory that it was the CIR's final act regarding the request for reconsideration. The very title expressly indicated that it was a final notice prior to seizure of property. The letter itself clearly stated that respondent was being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be subjected to distraint and levy
4. Guro SURIGAO ELECTRIC CO. AND LUMANLAN V MUNICIPALITY OF SURIGAO G.R. No. L-22766 August 30, 1968 FERNANDO, J. Facts: On June 18, 1960, Congress further amended the Public Service Act, one of the changes introduced doing away with the requirement of a certificate of public convenience and necessity from the Public Service Commission for "public services owned or operated by government entities or government-owned or controlled corporations," but at the same time affirming its power of regulation. A petition for review was filed on the basis of the order of Public Service Commission. The issue, according to respondent Commission, "boils down to whether or not a municipal government can directly maintain and operate an electric plant without obtaining a specific franchise for the purpose and without a certificate of public convenience and necessity duly issued by the Public Service Commission." Issue: WON local governments are exempted from the jurisdiction of PSC except with respect to fixing of rates Held: We have to ascertain the intent of Congress in introducing the above amendments, more specifically, in eliminating the requirement of the certificate of public convenience and necessity being obtained by government entities, or by government-owned or controlled corporations operating public services. Here, the Municipality of Surigao is not a government-owned or controlled corporation. It cannot be said, however, that it is not a government entity. It would, therefore, be to erode the term "government entities" of its meaning if we are to reverse the Public Service Commission and to hold that a municipality is to be considered outside its scope. It may be admitted that there would be no ambiguity at all had the term "municipal corporations" been employed. Our function, however, is to put meaning to legislative words, not to denude them of their contents. 5. Escalona YABES V FLOGO G.R. No. L-46954 July 20, 1982 CONCEPCION JR., J. Facts: Doroteo Yabes of Calamaniugan Cagayan, an exclusive dealer of products of the International Harvester Macleod, Inc., received a letter from the Commissioner of Internal Revenue, demanding payment of the amount of P15,976.81, as commercial broker's fixed and Page 15 of 50
percentage taxes plus surcharges and the sum of P2,530 as compromise penalty allegedly due from Yabes for the years 1956-1960. Yabes filed a protest. The Court of Tax Appeals ruled that agreements entered into by Constantino with the International Harvester Macleod, Inc. were of purchase and sale, and not of agency, hence no commercial broker's fixed and percentage fees could be collected from the said taxpayer. This Court reversed the decision of CTA and ruled in favor of CIR. After a lapse of 5 years, the heirs of petitioner filed a revised waiver further extending the period of prescription to December 31, 1970. On January 20, 1971, petitioners as heirs of the deceased Doroteo Yabes received the summons and a copy of the complaint filed by the Commissioner on December 4, 1970 with the Court of First Instance of Cagayan which seeks to collect from the petitioners the sum of P 15,976.82, as deficiency commercial broker's fixed and percentage taxes, including surcharges and interest thereon. Petitioner filed a petition with CTA despite the pendency of a collection proceeding in the trial court. The trial court denied the motion to dismiss by the petitioner. CTA, on the other hand, also denied the Commissioners motion to dismiss. Hence, this petition. Issue: WON the assessment made by the Commissioner of Internal Revenue against the deceased taxpayer Doroteo Yabes, as contained in the letter dated March 27, 1962, has become final, executory and incontestable, after Doroteo Yabes had received the Commissioner's letter dated August 3, 1962, denying the latter's protest against the said assessment on September 18, 1962 and his failure to appeal therefrom within the 30-day period contemplated under Section 11, of Republic Act 1125 Held: Yes. There is no reason for Us to disagree from or reverse the Court of Tax Appeals' conclusion that under the circumstances of this case, what may be considered as final decision or assessment of the Commissioner is the filing of the complaint for collection in the respondent Court of First Instance of Cagayan, the summons of which was served on petitioners on January 20, 1971, and that therefore the appeal with the Court of TaxAppeals in CTA Case No. 2216 was filed on time. 6. Villamor CIR V UNION SHIPPING CORP 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. Page 16 of 50
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. 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 decision 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, Page 17 of 50
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. 8. Macaraeg PHIL JOURNALISTS INC, V CIR YNARES-SANTIAGO, J.: FACTS: Page 18 of 50
The case arose from the Annual Income Tax Return filed by petitioner for the calendar year ended December 31, 1994 which presented a net income of P30,877,387.00 and the tax due of P10,807,086.00. After deducting tax credits for the year, petitioner paid the amount of P10,247,384.00. On August 10, 1995, Revenue District Office No. 33 of the Bureau of Internal Revenue (BIR) issued Letter of Authority No. 871204 for Revenue Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioners books of account and other accounting records for internal revenue taxes for the period January 1, 1994 to December 31, 1994. From the examination, the petitioner was told that there were deficiency taxes, inclusive of surcharges, interest and compromise penalty amounting to P 127,980,433.20. In a letter dated August 29, 1997, Revenue District Officer Jaime Concepcion invited petitioner to send a representative to an informal conference on September 15, 1997 for an opportunity to object and present documentary evidence relative to the proposed assessment. On September 22, 1997, petitioners Comptroller, Lorenza Tolentino, executed a "Waiver of the Statute of Limitation Under the National Internal Revenue Code (NIRC)".5 The document "waive[d] the running of the prescriptive period provided by Sections 223 and 224 and other relevant provisions of the NIRC and consent[ed] to the assessment and collection of taxes which may be found due after the examination at any time after the lapse of the period of limitations fixed by said Sections 223 and 224 and other relevant provisions of the NIRC, until the completion of the investigation".6 On July 2, 1998, Revenue Officer De Vera submitted his audit report recommending the issuance of an assessment and finding that petitioner had deficiency taxes in the total amount of P136,952,408.97. On October 5, 1998, the Assessment Division of the BIR issued Pre-Assessment Notices which informed petitioner of the results of the investigation. Thus, BIR Revenue Region No. 6, Assessment Division/Billing Section, issued Assessment/Demand letter. On March 16, 1999, a Preliminary Collection Letter was sent by Deputy Commissioner Romeo S. Panganiban to the petitioner to pay the assessment within ten (10) days from receipt of the letter. On November 10, 1999, a Final Notice Before Seizure8 was issued by the same deputy commissioner giving the petitioner ten (10) days from receipt to pay. Petitioner received a copy of the final notice on November 24, 1999. By letters dated November 26, 1999, petitioner asked to be clarified how the tax liability of P111,291,214.46 was reached and requested an extension of thirty (30) days from receipt of the clarification within which to reply.9 The BIR received a follow-up letter from the petitioner asserting that its (PJI) records do not show receipt of Tax Assessment/Demand No. 33-1-000757-94.10 Petitioner also contested that the assessment had no factual and legal basis. On March 28, 2000, a Warrant of Distraint and/or Levy No. 33-06-04611 signed by Deputy Commissioner Romeo Panganiban for the BIR was received by the petitioner. Petitioner filed a Petition for Review12 with the Court of Tax Appeals (CTA)and granted the petition. After the motion for reconsideration of the Commissioner of Internal Revenue was denied by the CTA in a Resolution dated August 2, 2002, an appeal was filed with the Court of Appeals on August 12, 2002. In its decision dated August 5, 2003, the Court of Appeals disagreed with the ruling of the CTA. Hence this petition ISSUE: WON the Waiver of the Statute of Limitations is valid and binding on the petitioner Page 19 of 50
RULING: The NIRC, under Sections 203 and 222,19 provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation.20 Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes after the expiration of a reasonable period of time. A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed.23 The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer relinquishes the right to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should perforce be strictly construed.24 RMO No. 20-90 explains the rationale of a waiver: ... The phrase "but not after _________ 19___" should be filled up. This indicates the expiry date of the period agreed upon to assess/collect the tax after the regular three-year period of prescription. The period agreed upon shall constitute the time within which to effect the assessment/collection of the tax in addition to the ordinary prescriptive period. (Emphasis supplied) As found by the CTA, the Waiver of Statute of Limitations, signed by petitioners comptroller on September 22, 1997 is not valid and binding because it does not conform with the provisions of RMO No. 20-90. It did not specify a definite agreed date between the BIR and petitioner, within which the former may assess and collect revenue taxes. Thus, petitioners waiver became unlimited in time, violating Section 222(b) of the NIRC. The waiver is also defective from the government side because it was signed only by a revenue district officer, not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain. The conformity of the BIR must be made by either the Commissioner or the Revenue District Officer. This case involves taxes amounting to more than One Million Pesos (P1,000,000.00) and executed almost seven months before the expiration of the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner of Internal Revenue to sign for the BIR. In the same manner, Warrant of Distraint and/or Levy No. 33-06-046 which petitioner received on March 28, 2000 is also null and void for having been issued pursuant to an invalid assessment. 9.Federio CIR V PHILIPPINE GLOBAL COMMUNICATIONS, INC. FACTS: Philippine Global Communication, Inc. (PGC) filed its Annual Income Tax Return on 15 April 1991. On 13 April 1992, the Commissioner of Internal Revenue (CIR) issued a Letter of Authority, authorizing Bureau of Internal Revenue (BIR) officials to examine PGCs accounting records. On 22 Page 20 of 50
April 1992, the BIR requested PGC to present for examination certain records and documents, but PGC failed to present any document. On 22 April 1994, PGC received a Formal Assessment Notice dated 14 April 1994, for deficiency income tax in the total amount of P118,271,672. In May 1994, PGC filed 2 letters of protest requesting for the cancellation of the tax assessment alleging that the same was invalid for lack of factual and legal basis. On 16 October 2002, more than 8 years after the assessment was presumably issued, PGC received from the CIR a Final Decision denying the protests. On 15 November 2002, PGC filed a Petition for Review with the CTA which decided in favor of PGC. The CTA, on the primary issue of prescription, decided that the protest letters filed by PGC cannot constitute a request for reinvestigation, hence, they cannot toll the running of the prescriptive period to collect the assessed deficiency income tax. Thus, since more than 3 years had lapsed from the time the Assessment Notice was issued in 1994, the CIRs right to collect the same has prescribed. ISSUE: whether or not CIRs right to collect is barred by prescription? HELD: Yes. The law prescribed a period of 3 years from the date the return was actually filed or from the last date prescribed by law for the filing of such return, whichever came later, within which the BIR may assess a national internal revenue tax. However, the the prescriptive period to assess or to begin a court proceeding for the collection without an assessment is 10 years when a false or fraudulent return was filed with the intent of evading the tax or when no return was filed at all. In such cases, the 10-year period began to run only from the date of discovery by the BIR of the falsity, fraud or omission. If the BIR issued this assessment within the 3-year period or the 10-year period, the law provided another 3 years after the assessment for the collection of the tax through the administrative process of distraint and/or levy or through judicial proceedings. The 3year period for collection of the assessed tax began to run on the date the assessment notice had been released, mailed or sent by the BIR. in this case, The assessment was presumably issued on 14 April 1994. Thus, the BIR had until 13 April 1997. However, as there was no Warrant of Distraint or Levy served on PGC nor any judicial proceedings initiated by the BIR, the earliest attempt of the BIR to collect the tax due based on this assessment was when it filed its Answer in the CTA Case on 9 January 2003, which was several years beyond the 3-year prescriptive period. Thus, the CIR is now prescribed from collecting the assessed tax. The Tax Code of 1977 provides instances when the running of the statute of limitations on the assessment and collection of national internal revenue taxes could be suspended, even in the absence of a waiver, one of which is when the taxpayer requests for a reinvestigation which is granted by the Commissioner. This exception does not apply to this case since PGC never requested for a reinvestigation. the CIR could not have conducted a reinvestigation where PGC refused to submit any new evidence. According to the Procedure Governing Administrative Protests of Assessment of the BIR, a Request for reconsideration refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional evidence. It may involve both a question of fact or of law or both. On the other hand, a Request for reinvestigation refers to a plea for re-evaluation of Page 21 of 50
an assessment on the basis of newly-discovered evidence or additional evidence that a taxpayer intends to present in the investigation. It may also involve a question of fact or law or both. The main difference between these two types of protests lies in the records or evidence to be examined by internal revenue officers, whether these are existing records or newly discovered or additional evidence. A re-evaluation of existing records which results from a request for reconsideration does not toll the running of the prescription period for the collection of an assessed tax. Sec. 271 distinctly limits the suspension of the running of the statute of limitations to instances when reinvestigation is requested by a taxpayer and is granted by the CIR. The rationale why a request for reinvestigation, and not a request for reconsideration, interrupts the running of the statute of limitations on the collection of the assessed tax is that a reinvestigation, which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the running of the statute of limitations on collection of the assessed tax, while the latter cannot. In the present case, the separate letters of protest are requests for reconsideration. The CIRs allegation that there was a request for reinvestigation is inconceivable since PGC consistently and categorically refused to submit new evidence and cooperate in any reinvestigation proceedings. Thus, the three-year statute of limitations on the collection of an assessed tax must be given effect. In providing for exceptions to such rule, the law strictly limits the suspension of the running of the prescription period to, among other instances, protests wherein the taxpayer requests for a reinvestigation. In this case, where the taxpayer merely filed 2 protest letters requesting for a reconsideration, and where the BIR could not have conducted a reinvestigation because no new or additional evidence was submitted, the running of statute of limitations cannot be interrupted. The tax which is the subject of the Decision issued by the CIR affirming the Formal Assessment issued on 14 April 1994 can no longer be the subject of any proceeding for its collection. Consequently, the right of the government to collect the alleged deficiency tax is barred by prescription. 10. Tecson RCBC V CIR FACTS: On 5/25/2001 RCBC received a Formal Letter of Demand from the CIR for its tax liabilities for 1997 for Gross Onshore Tax (P53,998,428.29) and Documentary Stamp Tax for its Special Savings Placements (P46,717,952.76). On 7/20/2001 RCBC filed a protest letter/request for reconsideration/reinvestigation pursuant to Section 228 of the NIRC. The protest was not acted upon so RCBC filed a petition for review with the CTA for the cancellation of the assessments. On 7/15/2003 the CIR filed a motion to resolve first the issue of CTAs jurisdiction, which was granted by the CTA in a Resolution dated 9/10/2003. The petition for review was dismissed because it was filed beyond the 30-day period following the lapse of 180 days from RCBCs submission of documents in support of its protest, as provided under Sec. 228 of the NIRC and Sec. 11 of RA 1125. RCBC did not file a motion for reconsideration or an appeal to the CTA En Banc from the dismissal of its petition for review. Consequently, the Resolution became final and executory and Entry of Judgment was made on 12/1/2003. Thereafter, CIR sent a Demand Letter to RCBC for the payment of the deficiency tax assessments. On 2/20/2004, RCBC filed a Petition for Relief from Judgment on the ground of excusable negligence of its counsels secretary who allegedly misfiled and lost the 9/10/2003 Resolution. The CTA 2nd Division set the case for hearing during which RCBCs counsel was present. CIR filed an Opposition while RCBC submitted its Manifestation and Counter-Motion. The CTA 2nd Division denied RCBCs Petition for Relief from Judgment. It likewise denied RCBCs motion for Page 22 of 50
reconsideration hence it filed a petition for review with the CTA En Banc, which affirmed the assailed Resolutions. Hence, this petition for review. RCBC argues that it was denied due process when it was not given the opportunity to be heard to prove that its failure to file a motion for reconsideration or appeal from the dismissal of its petition for review was due to the failure of its employee to forward the copy of the September 10, 2003 Resolution which constitutes excusable negligence. ISSUE: WON RCBC was denied due process? WON prescription has set in? HELD: No. Relief cannot be granted on the flimsy excuse that the failure to appeal was due to the neglect of RCBCs counsel. Otherwise, all that a losing party would do to salvage his case would be to invoke neglect or mistake of his counsel as a ground for reversing or setting aside the adverse judgment, thereby putting no end to litigation. Negligence to be "excusable" must be one which ordinary diligence and prudence could not have guarded against and by reason of which the rights of an aggrieved party have probably been impaired. RCBCs former counsels omission could hardly be characterized as excusable, much less unavoidable. Apparently, RCBCs counsel was not only remiss in complying with this admonition but he also failed to check periodically, as an act of prudence and diligence, the status of the pending case before the CTA 2nd Division. In exceptional cases, when the mistake of counsel is so palpable that it amounts to gross negligence, this Court affords a party a second opportunity to vindicate his right. But this opportunity is unavailing in the case at bar, especially since RCBC had squandered the various opportunities available to it at the different stages of this case. Public interest demands an end to every litigation and a belated effort to reopen a case that has already attained finality will serve no purpose other than to delay the administration of justice. Yes. Assuming, that the negligence of RCBCs counsel is excusable, still the petition for relief from judgment would not be granted, since RCBCs action for the cancellation of its assessments had already prescribed. Pursuant to Sec. 228 of the NIRC, Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within 180 days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the CTA within (30) days from receipt of the said decision, or from the lapse of the (180)-day period; otherwise the decision shall become final, executory and demandable. The CTA Second Division held: From July 20, 2001 (date of RCBCs filed protest), it had 60 days or until September 18, 2001 to submit relevant documents. And from September 18, 2001, the Commissioner had until March 17, 2002 to issue his decision. As admitted by RCBC, the protest remained unacted by the CIR. Therefore, it had until April 16, 2002 (30 days from lapse of 180 day period) within which to elevate the case to the CTA. Thus, when RCBC filed its Petition for Review on April 30, 2002, the same was outside the 30 day period. As provided in Section 228, the failure of a taxpayer to appeal from an assessment on time rendered the assessment final, executory and demandable. Consequently, RCBC is precluded from disputing the correctness of the assessment. While the right to appeal a decision of the CIR to the CTA is merely a statutory remedy, nevertheless the requirement that it must be brought within 30 days is jurisdictional and failure to comply therewith may be raised in a motion to dismiss. In fine, the failure to comply with the 30day statutory period would bar the appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessment. Page 23 of 50
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 Commissioner. 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. 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 Page 24 of 50
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) The power to recommend the promulgation of rules and regulations by the Secretary of Finance; (b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau; (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
G.R. No. 179343 January 21, 2010
FACTS: The CIR, by Letter of Authority dated May 16, 2000, ordered the examination of the internal revenue taxes for the taxable year 1999 of Fishwealth. The investigation disclosed that petitioner Page 25 of 50
was liable in the amount of P2,395,826.88 representing income tax, value added tax (VAT), withholding tax deficiencies and other miscellaneous deficiencies. Petitioner eventually settled these obligations on August 30, 2000. The CIR then reinvestigated petitioners books of accounts and other records of internal revenue taxes covering the same period for the purpose of which it issued a subpoena duces tecum requiring petitioner to submit its records and books of accounts. As petitioner did not heed the subpoena, respondent thereafter filed a criminal complaint against petitioner for violation of Sections 5 (c) and 266 of the 1997 Internal Revenue Code, which complaint was dismissed for insufficiency of evidence. Respondent sent, on August 6, 2003, petitioner a FAN of income tax and VAT deficiencies totaling P67,597,336.75 for the taxable year 1999, which assessment petitioner contested by letter of September 23, 2003. Respondent thereafter issued a Final Decision on Disputed Assessment dated August 2, 2005, which petitioner received on August 4, 2005, denying its letter of protest, apprising it of its income tax and VAT liabilities in the amounts of "P15,396,905.24 and P63,688,434.40 [sic], respectively, for the taxable year 1999," and requesting the immediate payment thereof. Instead of appealing to the CTA, petitioner filed a Letter of Reconsideration with the CIR. By a Preliminary Collection Letter dated September 6, 2005, respondent demanded payment of petitioners tax liabilities. Thus, petitioner filed on October 20, 2005 a Petition for Review before the CTA. In his Answer, respondent argued, among other things, that the petition was filed out of time which argument the First Division of the CTA upheld and accordingly dismissed the petition. Petitioner filed a Motion for Reconsideration which was denied. The Resolution denying its motion for reconsideration was received by petitioner on October 31, 2006. On November 21, 2006, petitioner filed a petition for review before the CTA En Banc which, by Decision of July 5, 2007, held that the petition before the First Division, as well as that before it, was filed out of time. ISSUE: Whether or not the Letter of Reconsideration filed with the CIR tolled the period to appeal with the CTA. HELD: No. Section 228 of the 1997 Tax Code provides that an assessment: x x x may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, the assessment shall become final. If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within thirty (30) days from receipt of Page 26 of 50
the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable. (underscoring supplied) In the case at bar, petitioners administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondents denial of its protest to the CTA. Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA. 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 from 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 Exemption5 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 (QC-LBAA, 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. Page 27 of 50
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 outpatient, 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 consequent 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 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 Philippine 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 Page 28 of 50
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 the 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 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 satisfaction 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 Page 29 of 50
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 G.R. No. 152904 June 8, 2007 VELASCO, JR., J. Facts: In the late 1990s, respondent constructed the CHH Medical Arts Center (CHHMAC). Thereafter, an April 17, 1998 Certificate of Occupancy was issued to the center with a classification of Commercial [Clinic]. Petitioner City Assessor of Cebu City assessed the CHHMAC building as commercial with a market value of PhP 28,060,520 and an assessed value of PhP 9,821,180 at the assessment level of 35% for commercial buildings, and not at the 10% special assessment currently imposed for CHH and its other separate buildingsthe CHHs Dietary and Records Departments. Respondent filed a petition in LBAA. LBAA ruled in favor of respondent. CBAA affirmed the decision of LBAA. CA also affirmed CBAAs decision. Issue: WON the new building is liable to pay the 35% assessment level Held: No. We so hold that CHHMAC is an integral part of CHH. Based on these provisions, these physicians holding offices or clinics in CHHMAC, duly appointed or accredited by CHH, precisely fulfill and carry out their roles in the hospitals services for its patients through the CHHMAC. The fact that they are holding office in a separate building, like at CHHMAC, does not take away the essence and nature of their services vis--vis the over-all operation of the hospital and the benefits to the hospitals patients. Verily, being an integral part of CHH, CHHMAC should be under the same special assessment level of as that of the former. The CHHMAC facility is definitely incidental to and reasonably necessary for the operations of Chong Hua Hospital. d.Alvarez CITY GOV OF SAN PABLO V HON. BIENVENIDO REYES G.R. No. 127708 March 25, 1999 GONZAGA-REYES, J. Facts: Act No. 3648 granted the Escudero Electric Service Company a legislative franchise to maintain and operate an electric light and power system in the City of San Pablo and nearby municipalities. Escudero's franchise was transferred to the plaintiff (herein respondent) MERALCO under Republic Act No. 2340. Republic Act No. 7160, otherwise known as the "Local Government Code of 1991" (hereinafter referred to as LGC) took effect on January 1, 1992. The said Code authorizes the province/city to impose a tax on business enjoying a franchise at a rate not exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year realized within its jurisdiction. The Sangguniang Panglunsod of San Pablo City enacted Ordinance No. 56, otherwise known as the Revenue Code of the City of San Pablo imposing a rate of fifty percent (50%) of one percent (1%) of the cross annual receipts to those businesses enjoying franchise. From 1994 to 1996, private respondent paid "under protest" a Page 30 of 50
total amount of P1,857,711.67. Then, it filed a petition to declare said ordinance void. The trial court ruled in favor of Meralco. Thus, petitioner filed a petition under Rule 45 before the SC. Issue: whether the City of San Pablo may impose a local franchise tax pursuant to the LGC upon the Manila Electric Company which pays a tax equal to two percent of its gross receipts in lieu of all taxes and assessments of whatever nature imposed by any national or local authority on savings or income. Held: Yes. Was there an implied repeal by Republic Act No. 7160 of the MERALCO franchise insofar as the latter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature"? Yes. It is our view that petitions correctly rely on the provisions of Sections 137 and 193 of the LGC to support their position that MERALCO`s tax exemption has been withdrawn. The explicit language of Section 137 which authorizes the province to impose franchise tax "notwithstanding any exemption granted by any law or other special law" is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under special laws. By stating that unless otherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons whether natural or juridical, including government-owned or controlled corporations except 1) local water districts, 2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the three enumerated entities. In the absence of any provision of the Code to the contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be withdrawn. e.Estember FIRST PHILIPPINE INDUSTRIAL COPRORATION VS CA G.R. No. 125948 December 29, 1999 MARTINEZ, J. Facts: Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract, install and operate oil pipelines. The original pipeline concession was granted in 1967 and renewed by the Energy Regulatory Board in 1992. Petitioner applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the Local Government Code. In order not to hamper its operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of 1993. The respondent City Treasurer denied the protest contending that petitioner cannot be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of the Local Government Code. The trial court dismissed the claim for refund filed by petitioner. CA affirmed the trial courts decision. Hence, this petition. Issue: WON petitioner is a common carrier and is exempt from local taxes Held: There is no doubt that petitioner is a common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its Page 31 of 50
services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. Moreover, under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common carrier." Thus, being a common carrier, petitioner is exempt from local tax as provided for in Sec. 133(j) of the LGC. f.Arana MANILA ELECTRIC COMPANY V PROVINCE OF LAGUNA GR No. 131359 May 5, 1999 Vitug, J. Facts: Manila Electric Company (MERALCO) was granted a franchise for the supply of electric light, heat and power. Subsequently, Republic Act No. 7160, otherwise known as the Local Government Code of 1991, was enacted to take effect on 01 January 1992 enjoining local government units to create their own sources of revenue and to levy taxes, fees and charges, subject to the limitations expressed therein, consistent with the basic policy of local autonomy. Pursuant to the provisions of the Code, respondent province enacted Laguna Provincial Ordinance No. 01-92, effective 01 January 1993. Respondent Provincial Treasurer sent a demand letter to MERALCO for the corresponding tax payment. Petitioner MERALCO paid the tax, which then amounted to P19,520,628.42, under protest. A formal claim for refund was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the franchise tax it had paid and continued to pay to the National Government pursuant to P.D. 551 already included the franchise tax imposed by the Provincial Tax Ordinance. The claim for refund was denied by the Governor. Petitioner then filed a complaint for refund in RTC which was dismissed. Hence, this petition. Issue: WON the local government has the power impose franchise tax on MERALCO Held: Yes. Indicative of the legislative intent to carry out the Constitutional mandate of vesting broad tax powers to local government units, the Local Government Code has effectively withdrawn under Section 193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities. These policy considerations are consistent with the State policy to ensure autonomy to local governments and the objective of the LGC that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units for the delivery of basic service essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, and there was a need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them. g.Villanueva G.R. No. 119122 August 8, 2000 PHILIPPINE BASKETBALL ASSOCIATION, petitioner, vs. Page 32 of 50
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 review2 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 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 payment 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 MIAA vs CA and the CITY of PARANAQUE G.R. No. 155650 July 20, 2006 CARPIO, J. Facts: Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation. The Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax Page 33 of 50
delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. MIAA filed with the Court of Appeals a petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. CA denied the petition. A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order which was granted. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction. Hence, this petition. Issue: WON MIAA is exempt from real estate taxes Held: Yes. We rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. i. Pambid PROVINCE OF BULACAN vs CA G.R. No. 126232 November 27, 1998 ROMERO, J. Facts: The Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. 3, known as "An Ordinance Enacting the Revenue Code of the Bulacan Province." which was to take effect on July 1, 1992. Pursuant thereto, the Provincial Treasurer of Bulacan, assessed private respondent Republic Cement Corporation (hereafter Republic Cement) P2,524,692.13 for extracting limestone, shale and silica from several parcels of private land in the province during the third quarter of 1992 until the second quarter of 1993. Republic Cement formally contested which was however denied. It filed a petition for declaratory relief in RTC which was dismissed by the latter. CA declared that the Provincial Ordinance No. 3 was void. Hence, it filed a petition for certiorari in SC. Issue: WON provinces have authority to impose taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands Held: No. The Court of Appeals erred in ruling that a province can impose only the taxes specifically mentioned under the Local Government Code. As correctly pointed out by petitioners, Section 186 allows a province to levy taxes other than those specifically enumerated under the Code, subject to the conditions specified therein. This finding, nevertheless, affords cold comfort to petitioners as they are still prohibited from imposing taxes on stones, sand, gravel, earth and other quarry resources extracted from private lands. The tax imposed by the Province of Bulacan is an excise tax, being a tax upon the performance, carrying on, or exercise of an activity. The National Internal Revenue Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private land. Thus, a province may not ordinarily impose taxes on stones, sand, gravel, earth and other quarry resources, as the same are already taxed under the National Internal Revenue Page 34 of 50
Code. The province can, however, impose a tax on stones, sand, gravel, earth and other quarry resources extracted from public land because it is expressly empowered to do so under the Local Government Code. As to stones, sand, gravel, earth and other quarry resources extracted from private land, however, it may not do so, because of the limitation provided by Section 133 of the Code in relation to Section 151 of the National Internal Revenue Code. j. Crespo DRILON v LIM G.R. No. 112497 August 4, 1994 CRUZ, J. Facts: The Secretary of Justice had, on appeal to him of four oil companies and a taxpayer, declared Ordinance No. 7794, otherwise known as the Manila Revenue Code, null and void for non-compliance with the prescribed procedure in the enactment of tax ordinances and for containing certain provisions contrary to law and public policy. In a petition for certiorari filed by the City of Manila, the Regional Trial Court of Manila revoked the Secretary's resolution and sustained the ordinance, holding inter alia that the procedural requirements had been observed. More importantly, it declared Section 187 of the Local Government Code as unconstitutional because of its vesture in the Secretary of Justice of the power of control over local governments in violation of the policy of local autonomy mandated in the Constitution and of the specific provision therein conferring on the President of the Philippines only the power of supervision over local governments. Hence, a petition was filed to the SC. Issue: WON Sec 187 of LGC is valid Held: Yes. Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for its annulment. He did not say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were performing their functions in accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the city government under the Local Government Code. As we see it, that was an act not of control but of mere supervision. REAL PROPERTY a.Rosalejos DAVAO SAWMILL CO. v CASTILLO G.R. No. L-40411 August 7, 1935 MALCOLM, J. Facts: The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. However, the land upon which the business was conducted belonged to Page 35 of 50
another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed and mounted on foundations of cement. It should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgages. Issue: WON the machineries are immovable properties Held: No. It is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of another. 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 assessments 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. 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. Page 36 of 50
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 government-owned 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 REYES V ALMANZOR G.R. Nos. L-49839-46 April 26, 1991 PARAS, J. Facts: Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. The National Legislature enacted Republic Act No. 6359 prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units or of lands on which another's dwelling is located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby disallowing the ejectment of lessees upon the expiration of the usual legal period of lease. Presidential Decree No. 20 amended R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite period. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on the schedule of market values duly reviewed by the Secretary of Finance. Petitioners filed a Page 37 of 50
Memorandum of Disagreement with the Board of Tax Assessment Appeals. The Board of Tax Assessment Appeals, however, considered the assessments valid. The Reyeses appealed to the Central Board of Assessment Appeals which affirmed the decision of BTAA. Issue: WON the Honorable Board erred in adopting the Comparable Sales Approach Method in the assessed value of appellants properties Held: Yes. Not even the factors determinant of the assessed value of subject properties under the "comparable sales approach" were presented by the public respondents, namely: (1) that the sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and (2) the property must be comparable property. Nothing can justify or support their view as it is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis for the conclusion that these properties were comparable with other residential properties not burdened by P.D. 20. Neither can the given circumstances be nonchalantly dismissed by public respondents as imposed under distressed conditions clearly implying that the same were merely temporary in character. At this point in time, the falsity of such premises cannot be more convincingly demonstrated by the fact that the law has existed for around twenty (20) years with no ento it in sight. Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties. d.Espinosa PECSON vs CA G.R. No. 105360 May 25, 1993 QUIASON, J. Facts: In Civil Case No. Q-41471, petitioner filed a complaint to annul the sale at a public auction conducted by respondent, Anselmo O. Regis, (City Treasurer of Quezon City) of petitioner's property for non-payment of real estate taxes, alleging that the sale was made without prior notice to him. The trial court upheld the validity of the public auction, saying that the notices of the auction sale published in a newspaper of general circulation were notices in rem. Petitioners petition to the CA was denied. Hence, he filed this petition under Rule 45. Issue: WON the public auction of his property for non-payment of taxes on the ground that the notices to him were sent to the wrong postal address was valid Held: Yes. Notices of the sale of the public auction may be sent to the delinquent taxpayer, either (i) at the address as shown in the tax rolls or property tax record cards of the municipality or city where the property is located or (ii) at his residence, if known to such treasurer or barrio captain. Petitioner does not claim that the notices issued from 1980 to 1983 should have been sent to him at his residence in "No. 79 Kamias Road, Quezon City," his residence since 1965 and where the property in litigation is located. What he claims is that the notices should have been sent to him at his address at "No. 1009 Paquita St., Sampaloc" even if he was no longer residing Page 38 of 50
there because letters sent to him at the said address were forwarded to him by the occupants of his former house. As found by the Court of Appeals, what appeared in the records of the Office of the City Treasurer of Quezon City as the address of petitioner was "1009 Paquita, Manila," and below the number 1009 was the number "79". From this entry, one can deduce that the taxpayer had transferred his residence to "No. 79 Paquita, Sampaloc, Manila" from "No. 1009 Paquita, Sampaloc, Manila". In the register for the tax years starting from 1982 (Exh. S; also Exh. 3), the address of petitioner was recorded as "79 Paquita, Mla." The Court of Appeals advanced the theory that the number "79" was furnished by petitioner himself, basing its conclusion on the address given by petitioner in his complaint, which was "No. 79 Kamias Road, Quezon City." e. Mangubat MATHAY JR, v MACALINGCAG G.R. No. 97618 December 16, 1993 Narvasa, C.J. Facts: Mathay, Jr., describing himself as "a member of Congress, and registered owner of lands in Quezon City and resident of Metro Manila," instituted in this Court a special civil action of prohibition against Victor Macalincag, then the Undersecretary of Finance, the City Assessor and the City Treasurer of Quezon City. The essential foundation of the petitioner's thesis of the nullity of the schedule of market values is that it was prepared by the respondent City Assessor alone, independently of the other City Assessors within the Metropolitan Manila Area, this being in patent violation of the explicit requirement of Section 9 of Presidential decree No. 921. Six (6) days later, a similar action was initiated in this Court by Rufino S. Javier on the same ground. The SC referred the case to CBAA and issued TRO and cease and desist orders. Issue: Whether the Schedule of Market Values was valid Held: No. Granting for the sake of argument, that E.O. No. 392 was a valid repealing act that abolished the Metropolitan Manila Commission, yet the said Executive Order did not in any manner affect the life of P.D. 921 nor the assessment districts and committee created therein under Section 9 thereof nor its provision regarding the preparation of schedule of market values for real properties within the Metropolitan Manila Area. So that, whether it is named Metro Manila Commission or Metro Manila Authority, P.D. 921 remains effective until validly repealed by subsequent legislation through Congress. This Board considers untenable the allegation in this Comment submitted to the Supreme Court for Respondent Hon. UndersecretaryVictor C. Macalincag, that the Respondent City Assessor has authority to prepare alone the questioned Schedule of Market Values for the reason that Section 9 of P.D. 921 refers to a general revision and has no application to selective revaluation or assessment of properties in a certain local government unit. There is nothing in the provision of Section 9 where we should distinguish between a general revision or revaluation or reassessment in the preparation of the Schedule of Market Values for Metropolitan Manila, as basis for the appraisal and assessment of taxation purposes of real properties located in the area. f. Dinoso PATALINHUG V CA G.R. No. 104786 January 27, 1994 ROMERO, J. Page 39 of 50
Facts: The Sangguniang Panlungsod of Davao City enacted Ordinance No. 363, otherwise known as the "Expanded Zoning Ordinance of Davao City." Petitioner commenced the construction of his funeral parlor after obtaining a building permit. Several residents of Barangay Agdao, Davao City filed a complaint and alleged that the construction of petitioner's funeral parlor violated Ordinance No. 363, since it was allegedly situated within a 50-meter radius from the Iglesia ni Kristo Chapel and several residential structures. Sangguniang Panlungsod conducted an investigation and found that "the nearest residential structure, owned by Wilfred G. Tepoot is only 8 inches to the south. Petitioner still proceeded with its construction despite the investigation. The lower court however dismissed the complaint. Private respondents appealed to CA which reversed the decision of the lower court. Hence, petitioner filed a petition to SC. Issue: whether or not petitioner's operation of a funeral home constitutes permissible use within a particular district or zone in Davao City. Held: Held: Yes. In the case at bar, the testimony of City Councilor Vergara shows that Mr. Tepoot's building was used for a dual purpose both as a dwelling and as a place where a laundry business was conducted. But while its commercial aspect has been established by the presence of machineries and laundry paraphernalia, its use as a residence, other than being declared for taxation purposes as such, was not fully substantiated. The reversal by the Court of Appeals of the trial court's decision was based on Tepoot's building being declared for taxation purposes as residential. It is our considered view, however, that a tax declaration is not conclusive of the nature of the property for zoning purposes. A property may have been declared by its owner as residential for real estate taxation purposes but it may well be within a commercial zone. A discrepancy may thus exist in the determination of the nature of property for real estate taxation purposes vis-a-vis the determination of a property for zoning purposes. 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.: 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. Page 40 of 50
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 protest 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 INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs.HON. FERDINAND J. MARCOS, in his capacity as the Presiding 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 created by virtue of Republic Act No. 6958, mandated to "principally undertake the economical, efficient and effective control, 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 Province of Cebu . . . (Sec. 3, RA 6958). Since the time of its 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 imposed 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 parcels of land belonging to the petitioner. Petitioner objected to such demand for payment as baseless 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 instrumentality of the government performing governmental functions, citing section 133 of the Local Government Code of 1991 which puts limitations on the taxing powers of local government units. ISSUE: WON THE CITY OF CEBU HAS THE POWER TO TAX 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 with the aforesaid Section 133 of the LGC. The power to tax 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 authority conferred
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San Beda College of Law|CLASS 3C-2010-2011 Taxation 1 Case Digest Case no. 91 and so on. by Section 5, Article X of the Constitution. 22 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 realty taxes imposed by the National Government or any of its political subdivisions, agencies, and instrumentalities. Nevertheless, since taxation is the rule and exemption 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 covered by the non-impairment clause of the Constitution. 23 The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the 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 limitations on the 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, cities, municipalities, and barangays shall not extend to the levy of the following: XXX (o) TAXES, FEES, OR CHARGES OF ANY KIND ON THE NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES, 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 juridical persons, including government owned and controlled 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 Code. 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, provinces, cities, municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has been granted, 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 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 limiting the retention only to those enumerated therein; 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 subdivisions covered by item (a) of the first paragraph of Section 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 controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been
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San Beda College of Law|CLASS 3C-2010-2011 Taxation 1 Case Digest Case no. 91 and so on. withdrawn. Any claim to the contrary can only be justified if the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 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: . . . 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) Page 43 of 50
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 LOPEZ v CITY OF MANILA G.R. No. 127139 February 19, 1999 QUISUMBING, J. Facts: Page 44 of 50
Mrs. Lourdes Laderas, the newly appointed City Assessor of Manila, received Memorandum Circular No. 04-95 dated March 20, 1995, from the Bureau of Local Government Finance, Department of Finance. This memorandum relates to the failure of most of the cities and municipalities of Metropolitan Manila, including the City of Manila, to conduct the general revision of real property. In the year 1995, the increase in valuation of real properties compared to the year-1979 market values ranges from 600% to 3,330%, but the City Assessor's office initially fixed the general average of increase to 1,700%. Mrs. Laderas felt that the increase may have adverse reactions from the public, hence, she ended up reducing the increase in the valuation of real properties to 1,020%. The proposed ordinance with the schedule of fair market values of real properties was published. With the implementation of Manila Ordinance No. 7894, the tax on the land owned by the petitioner was increased by five hundred eighty percent (580%). With respect to the improvement on petitioner's property, the tax increased by two hundred fifty percent (250%). Petitioner filed a petition to declare said ordinance void alleging that it was "unjust, excessive, oppressive or confiscatory." Manila Ordinance No. 7905 4 took effect, reducing by fifty percent (50%) the assessment levels. As a result, Manila Ordinance No. 7905 reduced the tax increase of petitioner's residential land to one hundred fifty-five percent (155%), while the tax increase for residential improvement was eighty-two percent (82%). Despite the reduction, the trial proceeded. The trial court dismissed the complaint. Issue: WON petitioner failed to exhaust administrative remedies Held: As a general rule, where the law provides for the remedies against the action of an administrative board, body, or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts. This rule, however, admits certain exceptions. With regard to question on the legality of a tax ordinance, the remedies available to the taxpayers are provided under Section 187, 226, and 252 of R.A. 7160. Sec. 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality of tax ordinance on appeal within thirty (30) days from effectivity thereof, to the Secretary of Justice. Should the taxpayers question the excessiveness of the amount of tax, he must first pay the amount due, in accordance with Section 252 of R.A. 7160. k. Goce CAGAYAN ROBINA SUGAR MILLING CO., vs CA GR No. 122451 October 12, 2000 Quisumbing, J. Facts: In 1990, the Assets Privatization Trust (APT) offered for sale all the assets and properties of the Cagayan Sugar Corporation (CASUCO), which had been foreclosed and transferred to APT by the Development Bank of the Philippines. Petitioner, as the highest bidder, acquired the aforesaid properties for a total price of P464,000,000.00. Among the properties bought by petitioner were sugar mill machineries. The Provincial Assessor of Cagayan issued a "Notice of Assessment of Real Property" to petitioner covering the machineries installed at the CASUCO millsite. Petitioner appealed the assessment to the LBAA, on the ground that it was excessive, erroneous, and Page 45 of 50
unjust. The LBAA resolved that the basis of the market value for assessment purposes of the properties acquired by petitioner should be the APT floor bid price of P355,000,000.00. By further deducting the value of machineries not subject to real property tax, the LBAA fixed the market value of the petitioner's machineries at P260,327,060.00 for assessment purposes. Petitioner then appealed to CBAA. The CBAA dismissed petitioner's appeal on the ground that it was timebarred. Petitioner appealed to the CA which was again denied by the latter. Thus, a petition was filed to the SC. Issue: Did the Court of Appeals err in finding the assessment of petitioner's machineries proper and correct under the Real Property Tax Code? Held: We note that the real property tax being assessed and collected against petitioner's machineries is for 1990. Hence, in this case, the applicable law is the Real Property Tax Code (P.D. No. 464), and not the Local Government Code of 1991 (R.A. No. 7160). We agree with petitioner that Section 28 of the Real Property Tax Code provides for a formula for computing the current market value of machineries. However, Section 28 must be read in consonance with Section 3 (n)[8] of the said law, which defines "market value." Under the latter provision, the LBAA and CBAA were not precluded from adopting various approaches to value determination, including adopting the APT "floor bid price" for petitioner's properties. In the instant case, petitioner failed to show that the use by the LBAA and CBAA of the APT floor bid price, pursuant to Section 3 (n) of the Real Property Tax Code was incorrect and done in bad faith. The method used by the LBAA and CBAA cannot be deemed erroneous since there is no rigid rule for the valuation of property, which is affected by a multitude of circumstances and which rules could not foresee nor provide for. l. Guro LIGHT RAIL TRANSIT AUTHORITY v CBAA CHAPTER XII 1.Escalona JAO v COURT OF APPEALS 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 yard-container 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 Page 46 of 50
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 ACTING COMMISSIONER OF CUSTOMS v CA FACTS: On 20 February 1980, Andrulis representing himself as an American businessman "on joint ventures with his Filipino counterparts", arrived in Manila and checked in at the Century Park Sheraton Hotel. Two days later, he left the hotel surreptitiously without paying for his bills. Chief Security Officer of the Hotel, timely discovered the scheduled departure of Andrulis on that same day, and immediately tipped-off the Customs authorities on Andrulis' intention to abscond. At the Manila International Airport (MIA), the Customs authorities looked for Andrulis. Andrulis finally yielded to the authorities and surrendered the luggage he was carrying which, when opened by the authorities, contained various foreign currencies consisting of US$59,639.00; 53,100 Indonesian Rupiah, and Singapore $308.00. A criminal charge was filed for violation of the Central Bank Circular but the Fiscal dismissed the charge on the rationalization that the Government had failed to present evidence that the currencies were not brought in by Andrulis. The Acting District Collector of Customs found Andrulis guilty. However, on appeal to the Court of Tax Appeals, it reversed the appealed Decision on the theory that the legal presumption of ownership has to be accorded the possessor of the res, who need not be obliged to show or prove it. The petitioner filed a Motion for Reconsideration on the ground that CTA had failed to consider that claimant Andrulis had the burden of proof to show that the foreign currencies seized from him were brought into the Philippines by him.
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Private respondent seeks refuge behind the exception in the aforequoted CB Circular No. 534 giving tourists the right to take out of the Philippines their own foreign exchange brought in by them. ISSUE: Who has the burden of proof in seizure or forfeiture proceedings? HELD: The claimant. Upon the facts of the case, the requirement of the law that the existence of probable cause should first be shown before firing of the forfeiture proceedings, had been fully met. When Andrulis was apprehended at the MIA and was found to have in his possession the various foreign currencies, he could not produce the required Central Bank authorization allowing him to bring them out of the country. This constituted prima facie evidence of infringement of the provisions of CB Circular No. 534 and provided sufficient basis for the seizure 'of the said foreign exchange. Probable cause having been shown, the burden of proof was upon Andrulis to establish that he fell within the purview of the exception prescribed in the second paragraph of the aforequoted Section 3 of CB Circular No. 534 in that he actually brought into the country the foreign currencies and was just taking them out. The legal presumption in Section 5(j), Rule 131 of the Rules of Court and Article 541 of the Civil Code, relied upon by respondent Court, are of a general character and cannot prevail over the specific provisions of the Tariff and Customs Code.
4. Macaraeg CHEVRON PHILIPPINES, INC. vs. COMMISSIONER OF THE BUREAU OF CUSTOMS GR No. 178759 August 11, 2008
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 Page 48 of 50
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 Under Section 1301 of the TCC, imported articles must be entered within a nonextendible 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). Page 49 of 50
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 30day 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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