CIR v. Marubeni Morada Facts: -Marubeni Corporation is a foreign corporation organized and existing under the laws of Japan.

. It is engaged in import and export trading, financing, and the construction business. It is duly registered in the Philippines and has a branch office in Manila -In 1985, the CIR examined the books of accounts of Marubeni and found it to have undeclared income from two contracts in the Philippines, both of which were completed in 1984. One contract was with the National Development Company for the construction of a wharf complex in Leyte, and the other contract was with the Philippine Phosphate Fertilizer Corp. (Philphos) for the construction of an ammonia storage complex, also in Leyte. -CIR assessed Marubeni for deficiency income, branch profit remittance, contractors and commercial brokers taxes. -Marubeni filed two petitions with the CTA questioning the assessment. -Earlier, E.O. 41 was issued, declaring a one-time amnesty for unpaid income taxes for the years 1981 to 1985. It was provided in the same E.O., however, that those with income tax cases already filed in Court was of the effectivity hereofmay not avail themselves of the tax amnesty herein granted. -E.O. 64 was subsequently issued amending E.O. 41 and extending its coverage to business, estate and donors taxes. -CTA granted the petitions of Marubeni because the latter had properly availed of the tax amnesty under E.O. Nos. 41 and 64. -CA affirmed the CTA decisions Issue: W/N Marubeni is liable for income and branch profit remittance tax. Held: NO, Marubeni is not liable for any of the taxes assessed by CIR. -As to the income and branch profit remittance tax (branch profit remittance also falls under income tax), Marubeni had properly availed of the tax amnesty provided by E.O. 41. It is not one of the taxpayers disqualified from availing of the amnesty for income tax since it filed the cases with CTA in Sept.26,1986, while E.O. 41 took effect in Aug.22,1986. This means when E.O. 41 became effective, the CTA cases had not yet been filed in court. Issue: W/N Marubeni is liable for contractors tax. Held: NO. -As to the contractors tax, however, this falls under business taxes covered by E.O. 64, which took effect on Nov.17, 1986. This E.O. contained the same disqualification clause as mentioned in E.O. 41. Marubeni filed the cases with CTA in Sept.26, prior to the effectivity of E.O.64. Thus it was already disqualified from availing of the tax amnesty under the said E.O. -It is Marubenis argument, however that even if it had not availed of the amnesty under the two executive orders, it is still not liable for the deficiency contractors tax because the income from the projects came from the Offshore Portion of the contracts. The two contracts were divided into two parts, i.e., the Onshore Portion and the Offshore Portion. All materials and equipment in the contract under the Offshore Portion were manufactured and completed in Japan, not in the Philippines, and are therefore not subject to Philippine taxes. -The income derived from the Onshore Portion of the two projects had been declared for tax purposes and the taxes thereon had already been paid. It is with regard to the Foreign Offshore Portion of the two contracts that the assessment liabilities in this case arose. -It is clear that some pieces of equipment and supplies were completely designed and engineered in Japan. The other construction supplies listed under the Offshore Portion were fabricated and manufactured by sub-contractors in Japan. All services for the design, fabrication, engineering, and manufacture of the materials and equipment under the Offshore Portion were made and completed in Japan. These services were rendered outside the taxing jurisdiction of the Philippines and are therefore not subject to the contractors tax. -The case of CIR v. Engineering Equipment & Supply Co.(EESC) cited by the petitioner CIR finds no application in the present case. In that case, the Court found that although EESC was an independent contractor which designs, supplies, and installs airconditioning units in the Philippines, it is not engaged in the manufacture of air conditioning units in the Philippines. The issues in that case dealt with services performed within the Philippines. There was no foreign element involved in the supply of materials and services.

Commissioner of Internal Reveue v. Estate of Benigno Toda, Jr. FACTS: - Cibeles Insurance Corp. (CIC) authorized Benigno Toda, Jr. to sell Cibeles Bldg.

- Toda purportedly sold to Altonaga, who in turn sold it to RMI - Toda sold his shares to Choa. - Altonaga paid capital gains tax in the amount of 10M. - CIR claims deficiency income tax. ISSUE: W/N the tax planning scheme adopted by CIC constitutes tax evasion that would justify an assessment of deficiency income tax. HELD: Yes. RATIO: 1. Tax evasion connotes the integration of 3 factors a. End to be achieved b. Accompanying state of mind which is described as being evil, bad faith, willful, or deliberate and not accidental. c. Course of action or failure of action which is unlawful 2. In this case, even before purported sale of Cibeles property by CIC to Altonaga, CIC already received 40M from RMI and not from Altonaga And it can be seen that Altonaga was a close business associate and one of the many trusted corporate executives of Toda. Such scheme is tainted with fraud. It is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid especially that the transfer from him to RMI would then subject the income to only 5% individual capital gains tax, and not the 35% corporate income tax. 3. The estate is liable because when Toda undertook and agreed to hold BUYER and Cibeles free from any all income tax liabilities, he thereby voluntarily held himself personally liable therefore.