Pascual vs. Commissioner of Internal Revenue G.R. No.

78133 October 18, 1988

Digest: AUMENTADO, Adrian F.
FACTS:
Petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and at a
later date, they bought another three (3) parcels of land from Juan Roque. The first
two parcels of land were sold by petitioners in 1968 to Marenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda
Reyes and Maria Samson. Petitioners realized a net profit in the sale made in 1968
and 1970. The corresponding capital gains taxes were paid by petitioners in 1973
and 1974 by availing of the tax amnesties granted in the said years. However, in a
letter of then Acting BIR Commissioner Plana, petitioners were assessed and
required to pay deficiency corporate income taxes for the years 1968 and 1970. The
commissioner contended that petitioners as co-owners in the real estate
transactions formed an unregistered partnership or joint venture taxable as a
corporation. Also, the unregistered partnership was subject to corporate income tax
as distinguished from profits derived from the partnership by them which is subject
to individual income tax; and that the availment of tax amnesty by petitioners
relieved petitioners of their individual income tax liabilities but did not relieve them
from the tax liability of the unregistered partnership. Hence, the petitioners were
required to pay the deficiency income tax assessed. ISSUE: Whether or not an
unregistered partnership or joint venture exists? HELD: There is no unregistered
partnership or joint venture.
There is no evidence that petitioners enttered into an agreement to contribute
money, property or industry to a common fund, and that they intended to divide the
profits among themselves. In the instant case, petitioners bought two (2) parcels of
land in 1965. They did not sell the same nor make any improvements thereon. In
1966, they bought another three (3) parcels of land from one seller. It was only
1968 when they sold the two (2) parcels of land after which they did not make any
additional or new purchase. The remaining three (3) parcels were sold by them in
1970. The transactions were isolated. The character of habituality peculiar to
business transactions for the purpose of gain was not present. The sharing of
returns does not in itself establish a partnership whether or not the persons sharing
therein have a joint or common right or interest in the property. There must be a
clear intent to form a partnership, the existence of a juridical personality different
from the individual partners, and the freedom of each party to transfer or assign the
whole property. There is clear evidence of co-ownership between the petitioners.
The two isolated transactions whereby they purchased properties and sold the same
a few years thereafter did not thereby make them partners. They shared in the
gross profits as co- owners and paid their capital gains taxes on their net profits and
availed of the tax amnesty thereby. Under the circumstances, they cannot be
considered to have formed an unregistered partnership which is thereby liable for
corporate income tax, as the respondent commissioner proposes.

Obillos vs. Commissioner of Internal Revenue G.R. No. L-68118. October 29, 1985
Digest by: AVILA, Alyssa Daphne M.
FACTS:
This case is about the income tax liability of four brothers and sisters who sold two
parcels of land which they had acquired from their father.
On March 2, 1973 Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two
lots located at Greenhills, San Juan, Rizal. The next day he transferred his rights to
his four children, the petitioners, to enable them to build their residences.
Presumably, the Torrens titles issued to them would show that they were co-owners
of the two lots. In 1974, the petitioners resold them to the Walled City Securities
Corporation and Olga Cruz Canda, deriving from the sale a total profit of
P134,341.88 or P33,584 for each of them. They treated the profit as a capital gain
and paid an income tax on one-half thereof or of P16,792. In April, 1980, the
Commissioner of Internal Revenue required the four petitioners to pay corporate
income tax on the total profit of P134,336 in addition to individual income tax on
their shares thereof. He assessed P37,018 as corporate income tax, P18,509 as 50%
fraud surcharge and P15,547.56 as 42% accumulated interest, or a total of
P71,074.56. He also considered the share of the profits of each petitioner in the sum
of P33,584 as a taxable in full (not a mere capital gain of which is taxable)
and required them to pay deficiency income taxes aggregating P56,707.20 including
the 50% fraud surcharge and the accumulated interest. Thus, the petitioners are
being held liable for deficiency income taxes and penalties totalling P127,781.76 on
their profit of P134,336, in addition to the tax on capital gains already paid by them.
The Commissioner acted on the theory that the four petitioners had formed an
unregistered partnership or joint venture within the meaning of sections 24(a) and
84(b) of the Tax Code. ISSUES: 1. Whether or not the petitioners have formed a
partnership under article 1767 of the Civil Code. 2. Whether or not the petitioners
are liable under the Tax Code. HELD: 1. NO. To regard the petitioners as having
formed a taxable unregistered partnership would result in oppressive taxation and
confirm the dictum that the power to tax involves the power to destroy. As testified
by Jose Obillos, Jr., they had no such intention. They were co-owners pure and
simple. Their original purpose was to divide the lots for residential purposes. If later
on they found it not feasible to build their residences on the lots because of the high
cost of construction, then they had no choice but to resell the same to dissolve the
co-ownership. The petitioners were not engaged in any joint venture by reason of
that isolated transaction. The division of the profit was merely incidental to the
dissolution of the co-ownership. Article 1769(3) of the Civil Code provides that
the sharing of gross returns does not of itself establish a partnership, whether
or not the persons sharing them have a joint or common right or interest in any
property from which the returns are derived. There must be an unmistakable
intention to form a partnership or joint venture.
2. NO. Not all co-ownerships are deemed unregistered partnership. A co-ownership
owning properties which produce income should not automatically be considered
partners of an unregistered

partnership, or a corporation, within the purview of the income tax law. To hold
otherwise, would be to subject the income of all co-ownerships of inherited
properties to the tax on corporations, inasmuch as if a property does not produce an
income at all, it is not subject to any kind of income tax, whether the income tax on
individuals or the income tax on corporation.
CIR vs. Philippine Airlines, Inc. (PAL) G.R. No. 179800. February 4, 2010 Digest by:
BAUTISTA, Cecille Catherine A.
FACTS:
PAL availed of the communication services of the Philippine Long Distance Company
(PLDT). For the period January 1, 2002 to December 31, 2002, PAL allegedly paid
PLDT the 10% (Overseas Communications Tax) OCT in the amount of P134,431.95
on its overseas telephone calls. Subsequently, PAL filed a claim for refund in the for
the amount of 10% OCT paid to PLDT from January to December 2002 citing as legal
bases Section 13 of Presidential Decree No. 1590 and BIR Ruling No. 97-94 dated
April 13, 1994. PAL contends that since it incurred negative taxable income for fiscal
years 2002 and 2003 and opted for zero basic corporate income tax, which was
lower than the 2% franchise tax, it had complied with the in lieu of all other
taxes clause of Presidential Decree (P.D.) No. 1590. Thus, it was no longer liable
for all other taxes of any kind, nature, or description, including the 10% OCT, and
the erroneous payments thereof entitled it to a refund pursuant to its franchise.
Petitioner CIR, on the other hand, insists that Section 120 of the 1997 NIRC, as
amended, imposes 10% OCT on overseas dispatch, message or conversion
originating from the Philippines, which includes PLDT communication services. It
further stated that respondent PAL, in order for it to be not liable for other taxes, in
this case the 10% OCT, should pay the 2% franchise tax, since it did not pay any
amount as its basic corporate income tax. ISSUE: Whether or not respondent PAL is
entitled to the tax refund claimed HELD: Yes. The Court, citing a similar case entitled
Commissioner of Internal Revenue vs. PAL, ruled that Presidential Decree 1590
granted Philippine Airlines an option to pay the lower of two alternatives: (a)
the basic corporate income tax based on PALs annual net taxable income
computed in accordance with the provisions of the National Internal Revenue
Code or (b) a franchise tax of two percent of gross revenues. Availment
of either of these two alternatives shall exempt the airline from the payment of
all other taxes, including the 20 percent final withholding tax on bank
deposits. A careful reading of Section 13 rebuts the argument of the CIR that
the in lieu of all other taxes proviso is a mere incentive that applies only
when PAL actually pays something. It is clear that PD 1590 intended to give
respondent the option to avail itself of Subsection (a) or (b) as consideration for its
franchise. Either option excludes the payment of other taxes and dues imposed or
collected by the national or the local government. PAL has the option to choose the
alternative that results in lower taxes. It is not the fact of tax payment that exempts
it, but the exercise of its option.
Chamber of Real Estate and Builders Associations (CREBA), Inc. vs. Romulo, et
al. G.R. No. 16075. March 9, 2010 Digest by: CABATU, Ricky Boy V.
FACTS:

Under the MCIT scheme, a corporation, beginning on its fourth year of operation, is
assessed an MCIT of 2% of its gross income when such MCIT is greater than the
normal corporate income tax imposed under Section 27(A). If the regular income tax
is higher than the MCIT, the corporation does not pay the MCIT. Any excess of the
MCIT over the normal tax shall be carried forward and credited against the normal
income tax for the three immediately succeeding taxable years. Petitioner assails
the validity of the imposition of MCIT on corporations. Petitioner argues that the
MCIT violates the due process clause because it levies income tax even if there is no
realized gain. It explains that gross income as defined under said provision only
considers the cost of goods sold and other direct expenses; other major
expenditures, such as administrative and interest expenses which are equally
necessary to produce gross income, were not taken into account. Thus, pegging the
tax base of the MCIT to a corporations gross income is tantamount to a
confiscation of capital because gross income, unlike net income, is not realized
gain. ISSUE: Whether or not the imposition of the MCIT on domestic corporations
is unconstitutional. HELD: MCIT Is Not Violative of Due Process. An income tax is
arbitrary and confiscatory if it taxes capital because capital is not income. In other
words, it is income, not capital, which is subject to income tax. However, the MCIT is
not a tax on capital. The MCIT is imposed on gross income which is arrived at by
deducting the capital spent by a corporation in the sale of its goods, i.e., the cost of
goods and other direct expenses from gross sales. Clearly, the capital is not being
taxed. Furthermore, the MCIT is not an additional tax imposition. It is imposed in lieu
of the normal net income tax, and only if the normal income tax is suspiciously low.
The MCIT merely approximates the amount of net income tax due from a
corporation, pegging the rate at a very much reduced 2% and uses as the base the
corporations gross income.
Further, Revenue Regulation 9-98, in declaring that MCIT should be imposed
whenever such corporation has zero or negative taxable income, merely defines the
coverage of Section 27(E). This means that even if a corporation incurs a net loss in
its business operations or reports zero income after deducting its expenses, it is still
subject to an MCIT of 2% of its gross income. This is consistent with the law which
imposes the MCIT on gross income notwithstanding the amount of the net income.
But the law also states that the MCIT is to be paid only if it is greater than the
normal net income. Obviously, it may well be the case that the MCIT would be less
than the net income of the corporation which posts a zero or negative taxable
income.f
china guinaldo Industries Corporation vs. Commissioner of Internal Revenues G.R.
No. L-29790 February 25, 1982
Digest by: MANALO, Samantha Grace N.

Filinvest vs. CIR/CTA

5. G.R. No 146941
August 9, 2007

FACTS:
Petitioner claimed for a refund or in the alternative, issuance of a tax credit
certificate (TCC) in the amount of P 4,178,134.00 representing excess creditable
withholding taxes for taxable years 1994,1995 and 1996. CTA dismissed the case for
insufficiency of evidence its 1997 income tax return. CA assailed the decision of CTA
and denied petition of Filinvest. The SC initially denied petition for review but on April 3,
2002, case was re-filed on a petition for reconsideration.
ISSUE:
Whether petitioner is entitled to the tax credit anent insufficient evidence.
RULING:
CA erred in ruling that petitioner failed to discharge the burden of proving that it
is entitled to the refund because of the latters failure to attach its 1997 ITR.
It is worth nothing that under Section 230 of NIRC and Section 10 of Revenue
Regulation No. 12-84, the CIR is given the power to grant a tax credit or refund even
without a written claim therefore, if the former determines from the face of the return that
payment had clearly been erroneously made. The CIRs function is not merely to
receive the claims for refund but it is also given the positive duty to determine the
veracity of such claim.
Simply by exercising the CIRs power to examine and verify petitioners claim for
tax exemption are granted by law, respondent CIR could have easily verified petitioners
claim by representing the latters 1997 ITR, the original of which it has in its files. Hence,
under solutio indebiti, the Government has to restore to petitioners the sums
representing erroneous payments of taxes.

CIR vs. Rosemarie Acosta

9. G.R. No. 154068
August 3, 2007
FACTS:
Acosta is an employee of Intel and was assigned in a foreign country. During
that period Intel withheld the taxes due and remitted them to BIR. Respondent claimed
overpayment of taxes and filed petition for review with CTA. CTA dismissed the petition
for failure to file a written claim for refund with the CIR a condition precedent to the filing
of a petition for review with the CTA. CA reversed the decision reasoning that Acostas
filing of an amended return indicating an overpayment was sufficient compliance with
the requirement of a written claim.
ISSUE:
Whether or not CTA has jurisdiction to take cognizance of respondents petition
for review.
RULING:

A party seeking an administrative rimedy must not merely initiate the prescribed
administrative procedure to obtain relie but also to pursue it to its appropriate conclusion
before seeking judicial intervention in order to give administrative agency an opportunity
to decide the matter itself correctly and prevent unnecessary and premature resort to
court action. At the time respondent filed her amended return, the 1997, NIRC was not
yet in effect, hence respondent had no reason to think that the filing of an amended
return would constitute the written claim required by law.
CTA likewise stressed that even the date of filing of the Final Adjustment return
was omitted, inadvertently or otherwise, by respondent in her petition for review. This is
fatal to respondents claim, for it deprived the CTA of its jurisdiction over the subject
matter of the case.
Finally, revenue statutes are substantive laws and in no sense must with that of
remedial laws. Revenue laws are not intended to be liberally constructed.

Atlas Consolidated Mining vs. CIR

14. G.R. 145526
March 16, 2007
FACTS:
Petitioner presented to CIR applications for refund or tax credit of excess input
taxes attributed from petitioners sales of gold on the theory that these were zero-related
transactions under Sec 160 (6) of Tax Code 1986. CTA denied petition on grounds of
prescription and insufficiency of evidence. The CTA and CA both found petitioner failed
to comply with the evidentiary requirements for claims for tax refund.
ISSUE:
Whether or not petitioner submitted sufficient evidence to justify grant of refund.
RULING:
CIR approved petitioners applications for zero-rating of its sales of gold to some
companies. It has always been ruled that those seeking tax refunds or credits bear the
burden of proving factual bases of their claims and of showing that the legislative
entitled them to such claims.
A photocopy of the purchase invoice or receipt evidencing the VAT paid shall be
submitted together with the application for tax refund. CTA circular 1-95 likewise
required submission of invoices or receipts showing the amounts of tax paid.
Both Courts correctly observed that petitioner never submitted nay of the
invoices or receipts required and held this omission to be fatal to its cause. A judicial
claim for refund or tax credit in CTA is by no means in original action but rather an
appeal by way of petition for review of a previous unsuccessful administrative claim.
Next, cases filed in CTA are litigated de novo. Thu8s, a petitioner should prove every

minute aspect of its case by presenting, formally offering and submitting its evidence to
the CTA.
While CTA is not governed by technical rules of evidence, as rules of procedure
are not ends in themselves but are primarily intended as tools in the administration of
justice, the presentation of the purchase receipts is no0t a mere procedural technically
which may be disregarded considering that it is the only means by which the CTA may
ascertain and verify the truth of claims.

SUPERLINES TRANSPORTATION COMPANY, INC., Petitioner, vs.PHILIPPINE

NATIONALCONSTRUCTION COMPANY and PEDRO BALUBAL, Respondents
94. G.R. No. 169596, March 28, 2007CARPIO MORALES,
FACTS:Superlines Transportation Company (Superlines) is engaged in the business
of providing public transportation. On 13 December 1990, one of its buses swervedand
crashed into the radio room of respondent Philippine National ConstructionCompany
(PNCC). The incident was initially investigated by PNCCs toll way patrol, Sofronio
Salvanera,and Pedro Balubal, then head of traffic control and security department of the
SouthLuzon tollway. The bus was then towed by the PNCC patrol upon request of
trafficinvestigator Cesar Lopera.Superlines made several requests for PNCC to release
the bus, but Balubal deniedthe same, despite Superlines undertaking to repair the
damaged radio room.Superlines thus filed a complaint for recovery of personal property
with damagesagainst PNCC and Balubal. The claim for damages, however, failed to
impleadLopera and any other police officer responsible for the seizure and distraint of
thebus as indispensable parties.
ISSUES:Whether or not Superlines claim for damages against can be passed
upon.Whether or not Superlines failure to implead indispensable parties is fatal to
itscause of action.
RULING:Anent the first issue, the Supreme Court ruled in the negative. The reason is
that acontract of deposit was perfected between the police authorities, through
Lopera,and PNCC, the former having turned over the bus to PNCC for safekeeping.
Hence,for Superlines to pursue its claim for damages, it or the trial court motu propriomust implead
as defendants the indispensable parties.With respect to the second issue, the Court
ruled, again, in the negative.Accordingly, the failure of Superlines to implead
indispensable parties is not fatal toits cause of action, since misjoinder or non-joinder of
parties is not a ground for itsdismissal. In other words, the non-joinder of indispensable
parties is not a groundfor the dismissal of an action. According to Section 11, Rule 3 of
the Rules of Court.
G.R. No. 134062 : April 17, 2007
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. BANK OF THE
PHILIPPINE ISLANDS, Respondent.

FACTS: In two notices dated October 28, 1988, petitioner Commissioner of Internal
Revenue (CIR) assessed respondent Bank of the Philippine Islands' (BPI's) deficiency
percentage and documentary stamp taxes for the year 1986 in the total amount of
P129,488,656.63:cra:nad
1986 - Deficiency Percentage Tax
Deficiency percentage tax

P 7, 270,892.88

Add: 25% surcharge

1,817,723.22

20% interest from 1-21-87 to 10-28-88

3,215,825.03

Compromise penalty

TOTAL AMOUNT DUE AND

COLLECTIBLE

15,000.00

P12,319,441.13

1986 - Deficiency Documentary Stamp Tax

Deficiency percentage tax

P93,723,372.40

Add: 25% surcharge

23,430,843.10

Compromise penalty

TOTAL AMOUNT DUE AND

COLLECTIBLE

15,000.00

P117,169,215.50.5

Both notices of assessment contained the following note:cra:nad

Please be informed that your [percentage and documentary stamp taxes have] been
assessed as shown above. Said assessment has been based on return - (filed by you) (as verified) - (made by this Office) - (pending investigation) - (after investigation). You
are requested to pay the above amount to this Office or to our Collection Agent in the
Office of the City or Deputy Provincial Treasurer ofra In a letter dated December 10,
1988, BPI, through counsel, replied as follows:

1. Your "deficiency assessments" are no assessments at all. The taxpayer is not

informed, even in the vaguest terms, why it is being assessed a deficiency. The very
purpose of a deficiency assessment is to inform taxpayer why he has incurred a
deficiency so that he can make an intelligent decision on whether to pay or to protest
the assessment. This is all the more so when the assessment involves astronomical
amounts, as in this case.
We therefore request that the examiner concerned be required to state, even in the
briefest form, why he believes the taxpayer has a deficiency documentary and
percentage taxes, and as to the percentage tax, it is important that the taxpayer be
informed also as to what particular percentage tax the assessment refers to.
2. As to the alleged deficiency documentary stamp tax, you are aware of the
compromise forged between your office and the Bankers Association of the Philippines
[BAP] on this issue and of BPI's submission of its computations under this compromise.
There is therefore no basis whatsoever for this assessment, assuming it is on the
subject of the BAP compromise. On the other hand, if it relates to documentary stamp
tax on some other issue, we should like to be informed about what those issues are.
3. As to the alleged deficiency percentage tax, we are completely at a loss on how such
assessment may be protested since your letter does not even tell the taxpayer what
particular percentage tax is involved and how your examiner arrived at the deficiency.
As soon as this is explained and clarified in a proper letter of assessment, we shall
inform you of the taxpayer's decision on whether to pay or protest the assessment.
ISSUE: Whether or not the petition be granted.
HELD: The petition is hereby GRANTED. Taxes are the lifeblood of the government, for
without taxes, the government can neither exist nor endure. A principal attribute of
sovereignty, the exercise of taxing power derives its source from the very existence of
the state whose social contract with its citizens obliges it to promote public interest and
common good. The theory behind the exercise of the power to tax emanates from
necessity; without taxes, government cannot fulfill its mandate of promoting the general
welfare and well-being of the people.