Paseo Realty vs CA

Topic: Tax Returns and Other Administrative Requirements

PASEO REALTY AND DEVELOPMENT CORP. vs.
COURT OF APPEALS
G.R. No. 119286 October 13, 2004
FACTS:
Paseo Realty and Development Corporation, a domestic corporation engaged in the lease of two parcels of land at
Paseo de Roxas in Makati City.
On April 16, 1990, petitioner filed its Income Tax Return for the calendar year 1989 declaring a gross income of
P1,855,000.00, deductions of P1,775,991.00, net income of P79,009.00, an income tax due thereon in the amount of P27,653.00,
prior years excess credit of P146,026.00, and creditable taxes withheld in 1989 of P54,104.00 or a total tax credit of P200,130.00
and credit balance of P172,477.00.
In a resolution dated October 21, 1993 Respondent Court reconsidered its decision of July 29, 1993 and dismissed the
petition for review, stating that it has overlooked the fact that the petitioners 1989 Corporate Income Tax Return (Exh. A)
indicated that the amount of P54,104.00 subject of petitioners claim for refund has already been included as part and parcel of
the P172,477.00 which the petitioner automatically applied as tax credit for the succeeding taxable year 1990.
Petitioner filed a Motion for Reconsideration which was denied by respondent Court on March 10, 1994.
Petitioner filed a Petition for Review dated April 3, 1994with the Court of Appeals. Resolving the twin issues of
whether petitioner is entitled to a refund of P54,104.00 representing creditable taxes withheld in 1989 and whether petitioner
applied such creditable taxes withheld to its 1990 income tax liability, the appellate court held that petitioner is not entitled to a
refund because it had already elected to apply the total amount of P172,447.00, which includes the P54,104.00 refund claimed,
against its income tax liability for 1990. The appellate court elucidated on the reason for its dismissal of petitioners claim for
refund
ISSUE:
Whether or not the alleged excess taxes paid by a corporation during a taxable year should be refunded or credited
against its tax liabilities for the succeeding year?
RULING:
The petition must be denied.
As a matter of principle, it is not advisable for this Court to set aside the conclusion reached by an agency such as the
CTA which is, by the very nature of its functions, dedicated exclusively to the study and consideration of tax problems and has
necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of its authority.
This interdiction finds particular application in this case since the CTA, after careful consideration of the merits of the
Commissioner of Internal Revenues motion for reconsideration, reconsidered its earlier decision which ordered the latter to
refund the amount of P54,104.00 to petitioner. Its resolution cannot be successfully assailed based, as it is, on the pertinent laws
as applied to the facts.
Petitioners 1989 tax return indicates an aggregate creditable tax of P172,477.00, representing its 1988 excess credit of
P146,026.00 and 1989 creditable tax of P54,104.00 less tax due for 1989, which it elected to apply as tax credit for the
succeeding taxable year.19 According to petitioner, it successively utilized this amount when it obtained refunds in CTA Case No.
4439 and CTA Case No. 4528 and applied its 1990 tax liability, leaving a balance of P54,104.00, the amount subject of the
instant claim for refund.
The confusion as to petitioners entitlement to a refund could altogether have been avoided had it presented its tax
return for 1990. Such return would have shown whether petitioner actually applied its 1989 tax credit of P172,477.00, which
includes the P54,104.00 creditable taxes withheld for 1989 subject of the instant claim for refund, against its 1990 tax liability as
it had elected in its 1989 return, or at least, whether petitioners tax credit of P172,477.00 was applied to its approved refunds as
it claims.
As clearly shown from the above-quoted provisions, in case the corporation is entitled to a refund of the excess
estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the
estimated quarterly income tax liabilities for the taxable quarters of the succeeding year. The carrying forward of any excess or
overpaid income tax for a given taxable year is limited to the succeeding taxable year only.
Taxation is a destructive power which interferes with the personal and property rights of the people and takes from them a portion
of their property for the support of the government. And since taxes are what we pay for civilized society, or are the lifeblood of
the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed
strictissimijurisagainst the taxpayer and liberally in favor of the taxing authority. A claim of refund or exemption from tax
payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the
rule, exemption therefrom is the exception

*Roxas vs CTA
Roxas vs. CTA
Roxas vs. CTA
GR No. L-25043 | April 26, 1968
Facts:

Don Pedro Roxas and Dona Carmen Ayala, both Spanish, transmitted to their grandchildren by hereditary succession the
following properties:

a.
-

Agricultural lands with a total area of 19,000 hectares in Nasugbu, Batangas

Tenants who have been tilling the lands expressed their desire to purchase from Roxas y Cia, the parcels which they actually
occupied

The govt, in line with the constitutional mandate to acquire big landed estates and apportion them among landless tenantsfarmers, persuaded the Roxas brothers to part with their landholdings

The brothers agreed to sell 13,500 hec to the govt for P2.079Mn, plus 300K survey and subdivision expenses

Unfortunately, the govt did not have funds

A special arrangement was made with the Rehabilitation Finance Corporation to advance to Roxas y Cia the amount of P1.5Mn
as loan

Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment, and contracted
with the RFC to pay its loan from the proceeds of the yearly amortizations paid by the farmers

In 1953 and 1955, Roxas y Cia. derived from said installment payments a net gain of P42,480.83 and P29,500.71. 50% of said
net gain was reported for income tax purposes as gain on the sale of capital asset held for more than one year pursuant to Sec. 34
of the Tax Code

b.

Residential house and lot at Wright St., Malate, Manila

After the marriage of Antonio and Eduardo, Jose lived in the house where he paid rentals of 8K/year to Roxas y Cia

c.

Shares of stocks in different corporations

To manage the properties, Antonio Roxas, Eduardo Roxas and Jose Roxas, the children, formed a partnership called Roxas y
Compania

On 1958, CIR demanded from Roxas y Cia the payment of real estate dealer's tax for 1952 amtg to P150.00 plus P10.00
compromise penalty for late payment, and P150.00 tax for dealers of securities plus P10.00 compromise penalty for late payment.

Basis: house rentals received from Jose, pursuant to Art. 194 of the Tax Code stating that an owner of a real estate who derives
a yearly rental income therefrom in the amount of P3,000.00 or more is considered a real estate dealer and is liable to pay the
corresponding fixed tax

The Commissioner further assessed deficiency income taxes against the brothers for 1953 and 1955, resulting from the inclusion
as income of Roxas y Cia of the unreported 50% of the net profits derived from the sale of the Nasugbu farm lands to the tenants,
and the disallowance of deductions from gross income of various business expenses and contributions claimed by Roxas y Cia
and the Roxas brothers

The brothers protested the assessment but was denied, thus appealing to the CTA
CTA decision: sustained the assessment except the demand for the payment of the fixed tax on dealer of securities and the
disallowance of the deductions for contributions to the Philippine Air Force Chapel and Hijas de Jesus' Retiro de Manresa
Issue: Should Roxas y Cia be considered a real estate dealer because it engaged in the business of selling real estate
Ruling: NO, being an isolated transaction

Real estate dealer: any person engaged in the business of buying, selling, exchanging, leasing or renting property on his own
account as principal and holding himself out as a full or part-time dealer in real estate or as an owner of rental property or
properties rented or offered to rent for an aggregate amount of three thousand pesos or more a year:

Section 194 of the Tax Code, in considering as real estate dealers owners of real estate receiving rentals of at least P3,000.00 a
year, does not provide any qualification as to the persons paying the rentals

The fact that there were hundreds of vendees and them being paid for their respective holdings in installment for a period of ten
years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the 10-year amortization period

the sale of the Nasugbu farm lands to the very farmers who tilled them for generations was not only in consonance with, but
more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless

It was the duty of the Government to pay the agreed compensation after it had persuaded Roxas y Cia. to sell its haciendas, and
to subsequently subdivide them among the farmers at very reasonable terms and prices. But due to the lack of funds, Roxas y Cia.
shouldered the Government's burden, went out of its way and sold lands directly to the farmers in the same way and under the
same terms as would have been the case had the Government done it itself

The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution to minimize
injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly

Therefore, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34 of the
Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale thereof is capital gain, taxable only to
the extent of 50%
As to the deductions

a.

P40 tickets to a banquet given in honor of Sergio Osmena and P28 San Miguel beer given as gifts to various persons
representation expenses

Representation expenses: deductible from gross income as expenditures incurred in carrying on a trade or business

In this case, the evidence does not show such link between the expenses and the business of Roxas y Cia

b.

Contributions to the Pasay police and fire department and other police departments as Christmas funds

Contributions to the Christmas funds are not deductible for the reason that the Christmas funds were not spent for public
purposes but as Christmas gifts to the families of the members of said entities

Under Section 39(h), a contribution to a government entity is deductible when used exclusively for public purposes
As to the contribution to the Manila Police trust fund, such is an allowable deduction for said trust fund belongs to the Manila
Police, a government entity, intended to be used exclusively for its public functions.

c.

Contributions to the Philippines Herald's fund for Manila's neediest families

The contributions were not made to the Philippines Herald but to a group of civic spirited citizens organized by the Philippines
Herald solely for charitable purposes

There is no question that the members of this group of citizens do not receive profits, for all the funds they raised were for
Manila's neediest families. Such a group of citizens may be classified as an association organized exclusively for charitable
purposes mentioned in Section 30(h) of the Tax Code

d.

Contribution to Our Lady of Fatima chapel at the FEU

University gives dividends to its stockholders

Located within the premises of the university, the chapel in question has not been shown to belong to the Catholic Church or
any religious organization

The contributions belongs to the Far Eastern University, contributions to which are not deductible under Section 30(h) of the
Tax Code for the reason that the net income of said university injures to the benefit of its stockholders

No deficiency income tax is due for 1953 from Antonio Roxas, Eduardo Roxas and Jose Roxas. For 1955 they are liable to pay
deficiency income tax in the sum of P109.00, P91.00 and P49.00, respectively

Planters Products vs Fertiphil Corp.

PLANTERS v FERTIPHIL
G.R. No. 166006
March 14, 2008
PLANTERS PRODUCTS, INC., Petitioner, vs. FERTIPHIL CORPORATION, Respondent.
FACTS:
Tax subject: FERTIPHIL, engaged in the import and distribution of fertilizers, pesticides, and agri chemicals.
Tax law: Letter of Instruction 1465 issued by Marcos in 1985
Tax: 10 peso levy per bag of fertilizer
Taxing Authority: the Fertilizer Pesticide Authority (FPA)
FPA would collect the tax and remit the amounts to the Far East bank account of Planters Products Inc. From 1985 to 1986,
Fertiphil paid about 6m.
After the EDSA Revolution, Fertiphil questioned the constitutionality of LOI 1465 among other grounds, that the tax
collected solely favored PPI, a privately owned corporation.
ISSUE: WON LOI 1465 was unconstitutional. YES
HELD:
Ruling summary: Taxes are exacted only for a public purpose. The P10 levy is unconstitutional because it was not for a public
purpose. The levy was imposed to give undue benefit to PPI.
Inherent limitation: must be levied for public purposes
One of the inherent limitations is that a tax may be levied only for public purposes.
The power to tax can be resorted to only for a constitutionally valid public purpose. By the same token, taxes may not
be levied for purely private purposes, for building up of private fortunes, or for the redress of private wrongs. They cannot be
levied for the improvement of private property, or for the benefit, and promotion of private enterprises, except where the aid is
incident to the public benefit. It is well-settled principle of constitutional law that no general tax can be levied except for the
purpose of raising money which is to be expended for public use. Funds cannot be exacted under the guise of taxation to promote
a purpose that is not of public interest. Without such limitation, the power to tax could be exercised or employed as an authority
to destroy the economy of the people. A tax, however, is not held void on the ground of want of public interest unless the want of
such interest is clear.
Public purpose defined
The term "public purpose" is not defined. It is an elastic concept that can be hammered to fit modern standards. Jurisprudence
states that "public purpose" should be given a broad interpretation. It does not only pertain to those purposes which are
traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes
those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, lowcost housing and urban or agrarian reform.
LOI 1465 gave undue benefit to PPI
The LOI expressly provided that the levy be imposed to benefit PPI, a private company. The purpose is explicit from Clause 3 of
the law:
3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing formula a capital contribution
component of not less than P10 per bag. This capital contribution shall be collected until adequate capital is raised to make
PPI viable.
Ensuring the continued supply and distribution of fertilizer in the country is an undertaking imbued with public interest.
However, the method by which LOI 1465 sought to achieve this is by no means a measure that will promote the public welfare.
The governments commitment to support the successful rehabilitation and continued viability of PPI, a private corporation, is an
unmistakable attempt to mask the subject statutes impartiality. There is no way to treat the self-interest of a favored entity, like
PPI, as identical with the general interest of the countrys farmers or even the Filipino people in general.
> PPI was ordered to refund Fertiphil

Kapatiran vs Tan
KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN vs. TAN

G.R. No. 81311 June 30, 1988

FACTS:
This petition seeks to nullify Executive Order No. 273 (EO 273, for short), issued by the President of the Philippines on
25 July 1987, to take effect on 1 January 1988, and which amended certain sections of the National Internal Revenue Code and
adopted the value-added tax (VAT, for short), for being unconstitutional in that its enactment is not alledgedly within the powers
of the President; that the VAT is oppressive, discriminatory, regressive, and violates the due process and equal protection clauses
and other provisions of the 1987 Constitution.

ISSUE:
Whether or not EO 273 was enacted by the president with grave abuse of discretion and whether or not such law is
unconstitutional.

RULING:
Petitioners have failed to show that EO 273 was issued capriciously and whimsically or in an arbitrary or despotic
manner by reason of passion or personal hostility. It appears that a comprehensive study of the VAT had been extensively
discussed by this framers and other government agencies involved in its implementation, even under the past administration.
The petitioners have failed to adequately show that the VAT is oppressive, discriminatory or unjust. Petitioners merely
rely upon newspaper articles which are actually hearsay and have evidentiary value. To justify the nullification of a law, there
must be a clear and unequivocal breach of the Constitution, not a doubtful and argumentative implication. The disputed sales tax
is also equitable. It is imposed only on sales of goods or services by persons engage in business with an aggregate gross annual
sales exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its application.