CIR v.

BPI
G.R. No. 178490 July 7, 2009
Chico-Nazario, J.
Doctrine:
1. The phrase for that taxable period merely identifies the excess income tax, subject of the option, by referring to the taxable
period when it was acquired by the taxpayer.
2. When circumstances show that a choice has been made by the taxpayer to carry over the excess income tax as credit, it should
be respected; but when indubitable circumstances clearly show that another choice, a tax refund, is in order, it should be granted.
As to which option the taxpayer chose is generally a matter of evidence.
Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and
thereby enrich itself at the expense of its law-abiding citizens.
Facts:
In filing its Corporate Income Tax Return for the Calendar Year 2000, BPI carried over the excess tax credits from the previous
years of 1997, 1998 and 1999. However, BPI failed to indicate in its ITR its choice of whether to carry over its excess tax credits
or to claim the refund of or issuance of a tax credit certificate.
BPI filed with the Commissioner of Internal Revenue (CIR) an administrative claim for refund. The CIR failed to act on the claim
for tax refund of BPI. Hence, BPI filed a Petition for Review before the CTA, whom denied the claim.
The CTA relied on the irrevocability rule laid down in Section 76 of the National Internal Revenue Code (NIRC) of 1997, which
states that once the taxpayer opts to carry over and apply its excess income tax to succeeding taxable years, its option shall be
irrevocable for that taxable period and no application for tax refund or issuance of a tax credit shall be allowed for the same.
The Court of Appeals reversed the CTA decision stating that there was no actual carrying over of the excess tax credit, given that
BPI suffered a net loss in 1999, and was not liable for any income tax for said taxable period, against which the 1998 excess tax
credit could have been applied.
The Court of Appeals further stated that even if Section 76 was to be construed strictly and literally, the irrevocability rule would
still not bar BPI from seeking a tax refund of its 1998 excess tax credit despite previously opting to carry over the same. The
phrase for that taxable period qualified the irrevocability of the option of BIR to carry over its 1998 excess tax credit to only
the 1999 taxable period; such that, when the 1999 taxable period expired, the irrevocability of the option of BPI to carry over its
excess tax credit from 1998 also expired.
Issue:
1. What is the period captured by the irrevocability rule?
2. Whether or not the taxpayers failure to mark the option chosen is fatal to whatever claim
Held:
1. The last sentence of Section 76 of the NIRC of 1997 reads: Once the option to carry-over and apply the excess quarterly
income tax against income tax due for the taxable quarters of the succeeding taxable years has been made, such option shall be
considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be
allowed therefor. The phrase for that taxable period merely identifies the excess income tax, subject of the option, by
referring to the taxable period when it was acquired by the taxpayer.
In the present case, the excess income tax credit, which BPI opted to carry over, was acquired by the said bank during the
taxable year 1998. The option of BPI to carry over its 1998 excess income tax credit is irrevocable; it cannot later on opt to apply
for a refund of the very same 1998 excess income tax credit.
2. No. Failure to signify ones intention in the FAR does not mean outright barring of a valid request for a refund, should one still
choose this option later on. The reason for requiring that a choice be made in the FAR upon its filing is to ease tax administration
(Philam Asset Management, Inc. v. CIR G.R. No. 156637 and No. 162004, 14 December 2005). When circumstances show that a
choice has been made by the taxpayer to carry over the excess income tax as credit, it should be respected; but when
indubitable circumstances clearly show that another choice a tax refund is in order, it should be granted. Therefore, as to
which option the taxpayer chose is generally a matter of evidence.
Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and
thereby enrich itself at the expense of its law-abiding citizens.

G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

FACTS:
The Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land,
factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara,
Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other
persons to invest in it. Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation
purchased the PSEDC properties. For this sale, Algue received as agent a commission of P126, 000.00, and it was from this
commission that the P75, 000.00 promotional fees were paid to the aforenamed individuals.

The petitioner contends that the claimed deduction of P75, 000.00 was properly disallowed because it was not an ordinary
reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it 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.

ISSUE:

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.

RULING:

The Supreme Court agrees with the respondent court that the amount of the promotional fees was not excessive. 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.

It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the
motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to
the taxing authorities, every person who is able to must contribute his share in the running of the government.


CIR vs CA and YMCA, [298 SCRA 83]
Facts: The main question in this case is: is the income derived from rentals of real property owned by Young Mens Christian
Association of the Philippines (YMCA) established as a welfare, educational and charitable non-profit corporation subject
to income tax under the NIRC and the Constitution? In 1980, YMCA earned an income of P676, 829 from leasing out a portion of
its premises to small shop owners, like restaurants and canteen operators and P44k form parking fees.
Issue: Is the rental income of the YMCA taxable?
Held: Yes. The exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Sec. 27
of the NIRC; court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt
at construction. The said provision mandates that the income of exempt organizations (such as YMCA) from any of their
properties, real or personal, be subject to the tax imposed by the same Code. Private respondent is exempt from the payment of
property tax, but nit income tax on rentals from its property.

Arturo Tolentino vs Secretary of Finance

Political Law Origination of Revenue Bills EVAT Amendment by Substitution
Tolentino et al is questioning the constitutionality of RA 7716 otherwise known as the Expanded Value Added Tax (EVAT) Law.
Tolentino averred that this revenue bill did not exclusively originate from the House of Representatives as required by Section
24, Article 6 of the Constitution. Even though RA 7716 originated as HB 11197 and that it passed the 3 readings in the HoR, the
same did not complete the 3 readings in Senate for after the 1
st
reading it was referred to the Senate Ways & Means Committee
thereafter Senate passed its own version known as Senate Bill 1630. Tolentino averred that what Senate could have done is
amend HB 11197 by striking out its text and substituting it w/ the text of SB 1630 in that way the bill remains a House Bill and
the Senate version just becomes the text (only the text) of the HB. Tolentino and co-petitioner Roco [however] even signed the
said Senate Bill.
ISSUE: Whether or not EVAT originated in the HoR.
HELD: By a 9-6 vote, the SC rejected the challenge, holding that such consolidation was consistent with the power of the Senate
to propose or concur with amendments to the version originated in the HoR. What the Constitution simply means, according to
the 9 justices, is that the initiative must come from the HoR. Note also that there were several instances before where Senate
passed its own version rather than having the HoR version as far as revenue and other such bills are concerned. This practice of
amendment by substitution has always been accepted. The proposition of Tolentino concerns a mere matter of form. There is
no showing that it would make a significant difference if Senate were to adopt his over what has been done.
Tolentino v. Secretary of Finance
Facts:
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of
services. RA 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the
National Internal Revenue Code. There are various suits challenging the constitutionality of RA 7716 on various grounds.


One contention is that RA 7716 did not originate exclusively in the House of Representatives as required by Art. VI, Sec. 24 of the
Constitution, because it is in fact the result of the consolidation of 2 distinct bills, H. No. 11197 and S. No. 1630. There is also a
contention that S. No. 1630 did not pass 3 readings as required by the Constitution.

Issue:
Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) ofthe Constitution

Held:
The argument that RA 7716 did not originate exclusively in the House of Representatives as required by Art. VI, Sec. 24 of the
Constitution will not bear analysis. To begin with, it is not the law but the revenue bill which is required by the Constitution to
originate exclusively in the House of Representatives. To insist that a revenue statute and not only the bill which initiated the
legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny
the Senates power not only to concur with amendments but also to propose amendments. Indeed, what the Constitution
simply means is that the initiative for filing revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills
and bills of local application must come from the House of Representatives on the theory that, elected as they are from the
districts, the members of the House can be expected to be more sensitive to the local needs and problems. Nor does the
Constitutionprohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House, so long as
action by the Senate as a body is withheld pending receipt of the House bill.

The next argument of the petitioners was that S. No. 1630 did not pass 3 readings on separate days as required by the
Constitution because the second and third readings were done on the same day. But this was because the President had
certified S. No. 1630 as urgent. The presidential certification dispensed with the requirement not only of printing but also that of
reading the bill on separate days. That upon the certification of a billby the President the requirement of 3 readings on separate
days and of printing and distribution can be dispensed with is supported by the weightof legislative practice.

LUTZ VS. ARANETA [98 Phil 148; G.R. No. L-7859; 22 Dec 1955]

Facts: Walter Lutz, as the Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, seeks to recover from J.
Antonio Araneta, the Collector of Internal Revenue, the sum of money paid by the estate as taxes, pursuant to the Sugar
Adjustment Act. Under Section 3 of said Act, taxes are levied on the owners or persons in control of the lands devoted to the
cultivation of sugar cane. Furthermore, Section 6 states all the collections made under said Act shall be for aid and support of
the sugar industry exclusively. Lutz contends that such purpose is not a matter of public concern hence making the tax levied for
that cause unconstitutional and void. The Court of First Instance dismissed his petition, thus this appeal before the Supreme
Court.

Issue: Whether or Not the tax levied under the Sugar Adjustment Act ( Commonwealth Act 567) is unconstitutional.


Held: The tax levied under the Sugar Adjustment Act is constitutional. The tax under said Act is levied with a regulatory purpose,
to provide means for the rehabilitation and stabilization of the threatened sugar industry. Since sugar production is one of the
great industries of our nation, its promotion, protection, and advancement, therefore redounds greatly to the general welfare.
Hence, said objectives of the Act are a public concern and is therefore constitutional. It follows that the Legislature may
determine within reasonable bounds what is necessary for its protection and expedient for its promotion. If objectives and
methods are alike constitutionally valid, no reason is seen why the state may not levy taxes to raise funds for their prosecution
and attainment. Taxation may be made with the implement of the states police power. In addition, it is only rational that the
taxes be obtained from those that will directly benefit from it. Therefore, the tax levied under the Sugar Adjustment Act is held
to be constitutional.