1. CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATION, INC. vs.

EXECUTIVE SECRETARY

FACTS:

CREBA assails the imposition of the minimum corporate income tax (MCIT) as being violative of the due process
clause as it levies income tax even if there is no realized gain. They also question the creditable withholding tax
(CWT) on sales of real properties classified as ordinary assets stating that (1) they ignore the different treatment of
ordinary assets and capital assets; (2) the use of gross selling price or fair market value as basis for the CWT and
the collection of tax on a per transaction basis (and not on the net income at the end of the year) are inconsistent
with the tax on ordinary real properties; (3) the government collects income tax even when the net income has not
yet been determined; and (4) the CWT is being levied upon real estate enterprises but not on other enterprises,
more particularly those in the manufacturing sector.

ISSUE:

Are the impositions of the MCIT on domestic corporations and CWT on income from sales of real properties
classified as ordinary assets unconstitutional?

HELD:

NO. MCIT does not tax capital but only taxes income as shown by the fact that the MCIT 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. Besides, there are sufficient safeguards that exist for the MCIT: (1) it is only imposed on the 4th year of
operations; (2) the law allows the carry forward of any excess MCIT paid over the normal income tax; and (3) the
Secretary of Finance can suspend the imposition of MCIT in justifiable instances.

The regulations on CWT did not shift the tax base of a real estate business income tax from net income to GSP or
FMV of the property sold since the taxes withheld are in the nature of advance tax payments and they are thus just
installments on the annual tax which may be due at the end of the taxable year. As such the tax base for the sale of
real property classified as ordinary assets remains to be the net taxable income and the use of the GSP or FMV is
because these are the only factors reasonably known to the buyer in connection with the performance of the duties
as a withholding agent.

Neither is there violation of equal protection even if the CWT is levied only on the real industry as the real estate
industry is, by itself, a class on its own and can be validly treated different from other businesses.

2. National Development Company v Commission on Internal Revenue

The NDC entered into contract in Tokyo with several Japanese shipbuilding companies for the construction of its 12
ocean-going vessels. The purchase price was to come from the proceeds of bonds issued by the Central Bank.
Initial payments were made in cash and through irrevocable letter of credit. Fourteen (14) promissory notes were
signed for the balance by the NDC guaranteed by Republic of the Philippines.

Pursuant thereto, the remaining payments and the interest thereon were remitted in due time by the NDC to Tokyo.
The NDC remitted to the ship builders in Tokyo the total amount of US$4,066,580 as interest on the balance of the
purchase price. No tax was withheld.

The Commissioner then held the NDC liable on such tax in the total sum of PhP5,115,234.74. The BIR thereupon
served on the NDC a warrant of distraint and levy to enforcce collection of the claimed amount.

Petitioner argues that the Japanese ship builders were not subject to tax under the sec. 37 of the Tax Code because
all the related activities- the signing of the contract, the construction of the vessels, the payment of the stipulated
price, and their delivery to the NDC - were done in Tokyo.
ISSUE: WON the Tokyo shipbuilders are subject to tax?

HELD:

The law specifies: interest derived from sources within the Philippines, and interest on bonds, notes, or other
interest-bearing obligation of resident, corporate or otherwise. Nothing there speak of the 'acts or activity' of non-
residential corporation in the Philippines, or place where the contract is signed.

The residence of the obligor who pays the interest rather than the physical location of the securities, bonds or notes
or the place of payment, is the determining factor of the source of interest income. Accordingly, if the obligor is a
resident of the Philippines the interest payment paid by him can have no other source than within the Philippines.
The interest is paid not by the bond note or other interest-bearing obligations, but by the obligor. It is not the NDC
that is being taxed. The tax was due on the interests earned by the Japanese shipbuilders. It was the income of
these companies and not the Republic of the Philippines that was subject to the tax the NDC did not withhold.

3. CIR v Marubeni

Facts:

CIR assails the CA decision which affirmed CTA, ordering CIR to desist from collecting the 1985 deficiency income,
branch profit remittance and contractors taxes from Marubeni Corp after finding the latter to have properly availed
of the tax amnesty under EO 41 & 64, as amended.

Marubeni, a Japanese corporation, engaged in general import and export trading, financing and construction, is duly
registered in the Philippines with Manila branch office. CIR examined the Manila branchs books of accounts for
fiscal year ending March 1985, and found that respondent had undeclared income from contracts with NDC and
Philphos for construction of a wharf/port complex and ammonia storage complex respectively.

On August 27, 1986, Marubeni received a letter from CIR assessing it for several deficiency taxes. CIR claims that
the income respondent derived were income from Philippine sources, hence subject to internal revenue taxes. On
Sept 1986, respondent filed 2 petitions for review with CTA: the first, questioned the deficiency income, branch
profit remittance and contractors tax assessments and second questioned the deficiency commercial brokers
assessment.

On Aug 2, 1986, EO 41 declared a tax amnesty for unpaid income taxes for 1981-85, and that taxpayers who
wished to avail this should on or before Oct 31, 1986. Marubeni filed its tax amnesty return on Oct 30, 1986.

On Nov 17, 1986, EO 64 expanded EO 41s scope to include estate and donors taxes under Title 3 and business tax
under Chap 2, Title 5 of NIRC, extended the period of availment to Dec 15, 1986 and stated those who already
availed amnesty under EO 41 should file an amended return to avail of the new benefits. Marubeni filed a
supplemental tax amnesty return on Dec 15, 1986.

CTA found that Marubeni properly availed of the tax amnesty and deemed cancelled the deficiency taxes. CA
affirmed on appeal.

Issue:

W/N Marubeni is exempted from paying tax

Held:

Yes . On date of effectivity , CIR claims Marubeni is disqualified from the tax amnesty because it falls under the
exception in Sec 4b of EO 41:
Sec. 4. Exceptions.The following taxpayers may not avail themselves of the amnesty herein granted: xxx b)
Those with income tax cases already filed in Court as of the effectivity hereof;

Petitioner argues that at the time respondent filed for income tax amnesty on Oct 30, 1986, a case had already
been filed and was pending before the CTA and Marubeni therefore fell under the exception. However, the point of
reference is the date of effectivity of EO 41 and that the filing of income tax cases must have been made before
and as of its effectivity.

EO 41 took effect on Aug 22, 1986. The case questioning the 1985 deficiency was filed with CTA on Sept 26, 1986.
When EO 41 became effective, the case had not yet been filed. Marubeni does not fall in the exception and is thus,
not disqualified from availing of the amnesty under EO 41 for taxes on income and branch profit remittance.

The difficulty herein is with respect to the contractors tax assessment (business tax) and respondents availment of
the amnesty under EO 64, which expanded EO 41s coverage. When EO 64 took effect on Nov 17, 1986, it did not
provide for exceptions to the coverage of the amnesty for business, estate and donors taxes. Instead, Section 8
said EO provided that:

Sectio 8. The provisions of Executive Orders Nos. 41 and 54 which are not contrary to or inconsistent with this
amendatory Executive Order shall remain in full force and effect.

Due to the EO 64 amendment, Sec 4b cannot be construed to refer to EO 41 and its date of effectivity. The general
rule is that an amendatory act operates prospectively. It may not be given a retroactive effect unless it is so
provided expressly or by necessary implication and no vested right or obligations of contract are thereby impaired.

4. CIR vs. CTA

FACTS:

Smith Kline and French Overseas Company, a multinational firm domiciled in Pennsylvania, is licensed to do
business in the Phils. It is engaged in the importation, manufacture, and sale of pharmaceutical drugs and
chemicals.

In its original incomes tax return in 1971, Smith Kline declared a net taxable income of P1,489,277 and paid
P511,247 as tax due. Among the deductions claimed from gross income was P501,040 as its share of the head
office overhead expenses.

However, in its amended return in 1973, there was an overpayment of P324,255 arising from underdeduction of
home office overhead. It made a formal claim for refund of the alleged overpayment because it appears that
sometime in October 1972, Smith Kline received from its international independent auditors an authenticated
certification to the effect that the Philippine share in the unallocated overhead expenses of the main office for the
year ended December 1971 was actually P1,427,484, and that the allocation was made on the basis of the
percentage of gross income in the Philippines to gross income of the corporation as a whole. By reason of the new
adjustment, Smith Klines tax liability was greatly reduced from P511,247 to P186,992, resulting in an overpayment
of P324,255.

The CTA rendered a decision in 1980 ordering the Commissioner to refund the overpayment or grant a tax credit to
Smith Kline. The Commissioner appealed.

ISSUE: Is Smith Klines share of the head office overhead expenses incurred outside the Philippines deductible?

HELD:

YES. Smith Klines share of the head officer overhead expenses incurred outside the Philippines is deductible.

Section 37 of the old NIRC. Net Income from sources in the Philippines.
From the items of gross income specified in subsection (a) of this section, there shall be deducted the expenses,
losses, and other deductions properly apportioned or allocated thereto and a ratable part of any expenses, losses,
or other deductions which cannot definitely be allocated to some item or class of gross income. The remained, if
any, shall be included in full as net income from sources within the Philippines.

Section 160. Apportionment of deductions.

The ratable part is based upon the ration of gross income from sources within the Philippines to the total gross
income

That is, 1/5 of the total gross income was from sources within the Philippines. The remainder of the gross income
was from sources without the Philippines. The expenses of the taxpayer for the year amount to P78,000. Of these
expenses, P8,000 is properly allocated to income from sources within the Phils and P40,000 is from sources without
the Phils. The remainder of the expense, P30,000, cannot be definitely allocated to any class of income. A ratable
part thereof, based upon the relation of gross income from sources within the Phils to the total gross income shall
be deducted in computing net income from sources within the Phils. Thus, these are deducted from the P36,000 of
gross income from sources within the Phils expenses amounting to P14,000 (representing P8,000 properly
apportioned to the income from sources within the Philippines and P6,000, a ratable part (1/5) of the expenses
which could not be allocated to any item or class of gross income). The remainder of P22,000 is the net income
from sources within the Phils.

5. First Lepanto Taisho Insurance Corporation vs.Commissioner of Internal Revenue

Facts

First Lepanto Taisho Insurance Corporation (petitioner) is a Large Taxpayer under Revenue Regulations No. 6-85,
as amended. The Commissioner of Internal Revenue (respondent) sent a Letter of Authority to petitioner to
examine atheir books of account for the year 1997 and other unverified years. On December 29, 1999, the
respondent issued tax assessments for deficiency income, withholding, expanded withholding, final withholding,
value-added, and documentary taxes for the year 1997. The petitioner protested such assessment, which it partially
withdrew in view of the tax amnesty program it had availed. The CTA ordered the petitioner to pay P 1,994,390.86
as deficiency withholding tax on compensation, expanded withholding tax, and final tax. The petitioner appealed to
the CTA En Banc which affirmed the decision of the CTA Division.

The CTA rejected the contention of the petitioner that it is not liable to pay withholding tax on compensation to
some of its directors since they were not employees and they had already been subjected to expanded withholding
tax. As to the petitioners transportation, subsistence and lodging, and representation allowance, the CTA En Banc
ruled that the petitioner failed to prove that those were actual expenses. As to deficiency expanded withholding
taxes on compensation, petitioner failed to substantiate that the commissions earned came from reinsurance
activities and should not be subject to withholding tax. As to deficiency final withholding taxes, petitioner failed to
present proof of remittance to establish that it had remitted the final tax on dividends paid as well as the payments
for services rendered by a Malaysian company.As to the imposition of delinquency interest, records reveal that
petitioner failed to pay the deficiency taxes within thirty (30) days from receipt of the demand letter, thus,
delinquency interest accrued from such non-payment.

Issue

Is the petitioner liable for the:

a. deficiency withholding taxes on compensation on directors bonuses;

b. deficiency final withholding taxes on payment of dividends and computerization expenses to foreign entities; and

c. delinquency interest under Section 249 (c) (3) of the NIRC?

Held:
Yes. The petitioner is liable for the deficiencies.

A. Deficiency withholding taxes on compensation on directors bonuses

For taxation purposes, a director is considered an employee under Section 5 of Revenue Regulation No. 12-86, to
wit:

An individual, performing services for a corporation, whether as an officer and director or merely as a director
whose duties are confined to attendance at and participation in the meetings of the Board of Directors, is an
employee.

The non-inclusion of the names of some of petitioners directors in the companys Alpha List does not ipso facto
create a presumption that they are not employees of the corporation, because the imposition of withholding tax on
compensation hinges upon the nature of work performed by such individuals in the company. Moreover, contrary to
petitioners attestations, Revenue Regulation No. 2-98, specifically, Section 2.57.2. A (9) thereof, cannot be applied
to this case as the latter is a later regulation while the accounting books examined were for taxable year 1997.

B. Deficiency final withholding taxes on payment of dividends and computerization expenses to foreign entities

As to the deficiency final withholding tax assessments for payments of dividends and computerization expenses
incurred by petitioner to foreign entities, particularly Matsui Marine & Fire Insurance Co. Ltd. (Matsui), the Court
agrees with CIR that petitioner failed to present evidence to show the supposed remittance to Matsui.

C. Delinquency interest under Section 249 (c) (3) of the NIRC

The Court likewise holds the imposition of delinquency interest under Section 249 (c) (3) ofthe 1997 NIRC to be
proper, because failure to pay the deficiency tax assessed within the time prescribed for its payment justifies the
imposition of interest at the rate of twenty percent (20%) per annum, which interest shall be assessed and collected
from the date prescribed for its payment until full payment is made.

It is worthy to note that tax revenue statutes are not generally intended to be liberally construed. Moreover, the
CTA being a highly specialized court .particularly created for the purpose of reviewing tax and customs cases, it is
settled that its findings and conclusions are accorded great respect and are generally upheld by this Court, unless
there is a clear showing of a reversible error or an improvident exercise of authority. Absent such errors, the
challenged decision should be maintained.

6. Calasanz v.CIR 144 SCRA 664 (October 9, 1986)

Facts:

Ursula Calasanz inherited from her father an agricultural land. Improvements were introduced to make such land
saleable and later in it were sold to the public at a profit. The Revenue examiner adjudged Ursula and her spouse as
engaged in business as real estate dealers and required them to pay the real estate dealers tax.

Issue: Whether or not the gains realized from the sale of the lots are taxable in full as ordinary income or capital
gains taxable at capital gain rates?

Held: The activities of Calasanz are indistinguishable from those invariably employed by one engaged in the
business of selling real estate. One strong factor is the business element of development which is very much in
evidence. They did not sell the land in the condition in which they acquired it. Inherited land which an heir
subdivides and makes improvements several times higher than the original cost of the land is not a capital asset
but an ordinary asses. Thus, in the course of selling the subdivided lots, they engaged in the real estate business
and accordingly the gains from the sale of the lots are ordinary income taxable in full
7. South African Airways v CIR

Facts:

South African Airways, a foreign corporation with no license to do business in the Philippines, sells passage
documents for off-line flights through Aerotel Limited, general sales agent in the Philippines

Feb 5, 2003: Petitioner filed a claim for refund erroneously paid tax on Gross Philippine Billing (GPB) for the year
2010.

CTA: denied - petitioner is a resident foreign corp. engaged in trade or business in the Philippines and therefore is
NOT liable to pay tax on GPB under the Sec. 28 (A) (3) (a) of the 1997 NIRC but cannot be allowed refund because
liable for the 32% income tax from its sales of passage documents.

This is upheld by the CTA and CTA En Banc

Issue:

1. W/N petitioner is engaged in trade or business in the Philippines is subject to 32% income tax.

2. W/N petitioner is entitled to refund

HELD: CTA En Banc decision is set side

1. Yes. Since it does not maintain flights to or from the Philippines, it is not taxable under Sec. 28(A)(3)(a) of the
1997 NIRC. This much was also found by the CTA. But petitioner further posits the view that due to the non-
applicability of Sec. 28(A)(3)(a) to it, it is precluded from paying any other income tax for its sale of passage
documents in the Philippines. But, Sec. 28 (A)(1) of the 1997 NIRC does not exempt all international air carriers
from the coverage of Sec. 28 (A) (1) of the 1997 NIRC being a general rule. Petitioner, being an international carrier
with no flights originating from the Philippines, does not fall under the exception. As such, petitioner must fall under
the general rule. This principle is embodied in the Latin maxim, exception firmat regulam in casibus non exceptis,
which means, a thing not being excepted must be regarded as coming within the purview of the general rule.

2. Underterminable. Although offsetting of tax refund with tax deficiency is unavailing under Art. 1279 of the Civil
Code, in CIR v. CTA it granted when deficiency assessment is intimately related and inextricably intertwined with
the right to claim for a tax refund. Sec. 72 Chapter XI of 1997 NIRC is not applicable where petitioner's tax refund
claim assumes that the tax return that it filed were correct because petitioner is liable under Sec. 28 (A)(1), the
correctness is now put in doubt and refund cannot be granted. It cannot be assumed that the liabilities for two
different provisions would be the same. There is a necessity for the CTA to receive evidence and establish the
correct amount before a refund can be granted.

8. CIR v Mitsubishi Metal

Facts:

On April 17, 1970, Atlas Consolidated Mining and Development Corporation entered into a Loan and Sales Contract
with Mitsubishi Metal Corporation, a Japanese corporation licensed to engage in business in the Philippines, for
purposes of the projected expansion of the productive capacity of the former's mines in Toledo, Cebu. Under said
contract, Mitsubishi agreed to extend a loan to Atlas 'in the amount of $20,000,000.00, United States currency.
Atlas, in turn undertook to sell to Mitsubishi all the copper concentrates produced for a period of fifteen (15) years.
Mitsubishi thereafter applied for a loan with the Export-Import Bank of Japan (Eximbank) for purposes of its
obligation under said contract. Its loan application was approved on May 26, 1970 in the equivalent sum of
$20,000,000.00 in United States currency at the then prevailing exchange rate. The records in the Bureau of
Internal Revenue show that the approval of the loan by Eximbank to Mitsubishi was subject to the condition that
Mitsubishi would use the amount as a loan to Atlas and as a consideration for importing copper concentrates from
Atlas, and that Mitsubishi had to pay back the total amount of loan by September 30, 1981. Pursuant to the contract
between Atlas and Mitsubishi, interest payments were made by the former to the latter totaling P13,143,966.79 for
the years 1974 and 1975. The corresponding 15% tax thereon in the amount of P1,971,595.01 was withheld
pursuant to Section 24 (b) (1) and Section 53 (b) (2) of the National Internal Revenue Code, as amended by
Presidential Decree No. 131, and duly remitted to the Government.

Issue: Whether or not the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross
income taxation pursuant to Section 29 of the tax code and, therefore, exempt from withholding tax.

Held: The court ruled in the negative. Eximbank had nothing to do with the sale of the copper concentrates since all
that Mitsubishi stated in its loan application with the former was that the amount being procured would be used as
a loan to and in consideration for importing copper concentrates from Atlas. Such an innocuous statement of
purpose could not have been intended for, nor could it legally constitute, a contract of agency. The conclusion is
indubitable; MITSUBISHI, and NOT EXIMBANK, is the sole creditor of ATLAS, the former being the owner of the $20
million upon completion of its loan contract with EXIMBANK of Japan. It is settled a rule in this jurisdiction that laws
granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing
power. Taxation is the rule and exemption is the exception. The burden of proof rests upon the party claiming
exemption to prove that it is in fact covered by the exemption so claimed, which the petitioners have failed to
discharge. Significantly, private respondents are not among the entities which, under Section 29 of the tax code,
are entitled to exemption and which should indispensably be the party in interest in this case.

9. CIR v Wander Philippines

FACTS:

Private respondents Wander Philippines, Inc. (wander) is a domestic corporation organized under Philippine laws. It
is wholly-owned subsidiary of the Glaro S.A. Ltd. (Glaro), a Swiss corporation not engaged in trade for business in
the Philippines.

Wander filed it's witholding tax return for 1975 and 1976 and remitted to its parent company Glaro dividends from
which 35% withholding tax was withheld and paid to the BIR.

In 1977, Wander filed with the Appellate Division of the Internal Revenue a claim for reimbursement, contending
that it is liable only to 15% withholding tax in accordance with sec. 24 (b) (1) of the Tax code, as amended by PD
nos. 369 and 778, and not on the basis of 35% which was withheld ad paid to and collected by the government.
petitioner failed to act on the said claim for refund, hence Wander filed a petition with Court of Tax Appeals who in
turn ordered to grant a refund and/or tax credit. CIR's petition for reconsideration was denied hence the instant
petition to the Supreme Court.

ISSUE:

Whether or not Wander is entitled to the preferential rate of 15% withholding tax on dividends declared and to
remitted to its parent corporation.

HELD:

Section 24 (b) (1) of the Tax code, as amended by PD 369 and 778, the law involved in this case, reads:

sec. 1. The first paragraph of subsection (b) of section 24 of the NIRC, as amended is hreby further amended to read
as follows:

(b) Tax on foreign corporations - (1) Non resident corporation -- A foreign corporation not engaged in trade or
business in the Philippines, including a foreign life insurance company not engaged in life insurance business in the
Philippines, shall pay a tax equal to 35% of the gross income received during its taxable year from all sources within
the Philippines, as interest (except interest on a foreign loans which shall be subject to 15% tax), dividends,
premiums, annuities, compensation, remuneration for technical services or otherwise emolument, or other fixed
determinable annual, periodical ot casual gains, profits and income, and capital gains: xxx Provided, still further
that on dividends received from a domestic corporation liable to tax under this chapter, the tax shall be 15% of the
dividends received, which shall be collected and paid as provided in sec 53 (d) of this code, subject to the condition
that the country in which the non-resident foreign corporation is domiciled shall allow a credit against tax due from
the non-resident foreign corporation taxes deemed to have been paid in the Philippines equivalent to 20% which
represents the difference between the regular tax (35%) on corporation and the tax (15%) dividends as provided in
this section

10. CIR v Tuason

FACTS:

CTA set aside petitioners revenue commissioners assessment of 1.1 M as the 25% surtax on private respondents
unreasonable accumulation of surplus for the year 1975-1978.

Private respondent protested the assessment on the ground that the accumulation of surplus profits during the
years in question was solely for the purpose of expanding its business operations as a real estate broker.

Private res. Filed a petition that pending determination of the case, an order be issued restraining the
commissioner and/or his reps from enforcing the warrants of distraint and levy. Writ of injunction was issued by tax
court.

Due to the reversal of CTA of the commissioners decision, CIR appeals to the SC.

ISSUES:

1. Whether or not private respondent is a holding company and/or investment company?

2. Whether or not Antonio accumulated surplus for years 75-78

3. Whether or not Tuason Inc. is liable for the 25% surtax on undue accumulation of surplus for 75-78

HELD: Yes to all. Antionio is liable for the 25% surtax assessed.

Sec. 25. Additional tax on corporation improperly accumulating profits or surplus.

(a) Imposition of tax. If any corporation, except banks, insurance companies, or personal holding companies,
whether domestic or foreign, is formed or availed of for the purpose of preventing the imposition of the tax upon its
shareholders or members or the shareholders or members of another corporation, through the medium of
permitting its gains and profits to accumulate instead of being divided or distributed, there is levied and assessed
against such corporation, for each taxable year, a tax equal to twenty-five per centum of the undistributed portion
of its accumulated profits or surplus which shall be in addition to the tax imposed by section twentyfour, and shall
be computed, collected and paid in the same manner and subject to the same provisions of law, including penalties,
as that tax.

(b) Prima facie evidence. The fact that any corporation is a mere holding company shall be prima facie evidence
of a purpose to avoid the tax upon its shareholders or members. Similar presumption will lie in the case of an
investment company where at any time during the taxable year more than fifty per centum in value of its
outstanding stock is owned, directly or indirectly, by one person.

In this case, Tuason Inc, a mere holding company for the corporation did not involve itself in the development of
subdivisions but merely subdivided its own lots and sold them for bigger profits. It derived its income mostly from
interest, dividends, and rentals realized from the sale of realty.
Tuason Inc is also owned by Antonio himself. While these profits were actually made, the commissioner points out
that the corp. did not use up its surplus profits. Antonio claims that he spent the money to build an apartment in
urdaneta but theres a large discrepancy bet. The market value and the alleged investment cost.

The importance of liability is the purpose behind the accumulation of the income and not the consequences of the
accumulation. Thus, if the failure to pay dividends were for the purpose of using the undistributed earnings & profits
for the reasonable needs of the business, that purpose would not fall to overcome the presumption and correctness
of CIR.

11. Tan v Del Rosario, Jr.

Facts:

This is a consolidated case involving the constitutionality of RA 7496 or the Simplified Net Income Taxation (SNIT)
scheme.

Petitioners claim to be taxpayers adversely affected by the continued implementation of the SNIT. In the 1st case,
they contend that the House Bill which eventually became RA 7496 is a misnomer or deficient because it was
named as Simplified Net Income Taxation Scheme for the Self-Employed and Professionals Engaged in the Practice
of their Profession while the actual title contains the said words with the additional phrase, Amending Section
21 and 29 of the National Internal Revenue Code.

In the 2nd case, they argue that respondents have exceeded their rule-making authority in applying SNIT to general
professional partnerships by issuing Revenue Regulation 2-93 to carry out the RA.

Issue:

Whether or not general professional partnerships may be taxed under SNIT

Held:

No. A general professional partnership is not itself an income taxpayer. Income tax is imposed not on the
partnership (which is tax exempt), but on the partners themselves in their individual capacity computed on their
distributive shares of partnership profits. There is no distinction in income tax liability between a person who
practices his profession alone and one who does it through partnership with others in the exercise of a common
profession.

In the case, SNIT is not envisioned by the Congress to cover corporations or partnerships which are independently
subject to the payment of income tax.

2 KINDS OF PARTNERSHIPS UNDER TAX CODE

1. Taxable Partnerships no matter how it was created or organized, they are subject to income tax by law.

2. Exempt Partnerships the partners, not the partnership (although obligated to file an income tax return for
administration and data) are liable for income tax in their individual capacity.

12. Mactan Cebu International Airport Authority v. Marcos

Facts:

Petitioner Mactan Cebu International Airport Authority was created by virtue of R.A. 6958, mandated to principally
undertake the economical, efficient, and effective control, management, and supervision of the Mactan
International Airport and Lahug Airport, and such other airports as may be established in Cebu.
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. However, on October 11, 1994, Mr. Eustaquio B. Cesa, Officer in Charge,
Office of the Treasurer of the City of Cebu, demanded payment from realty taxes in the total amount of
P2229078.79. Petitioner objected to such demand for payment as baseless and unjustified claiming in its favor the
afore cited Section 14 of R.A. 6958. 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.

Section 133. Common limitations on the Taxing Powers of Local Government Units.

The exercise of the taxing powers of the provinces, cities, barangays, municipalities shall not extend to the levi of
the following:

Taxes, fees or charges of any kind in the National Government, its agencies and instrumentalities, and LGUs. xxx

Respondent City refused to cancel and set aside petitioners realty tax account, insisting that the MCIAA is a
government-controlled corporation whose tax exemption privilege has been withdrawn by virtue of Sections 193
and 234 of Labor Code that took effect on January 1, 1992.

Issue:

Whether or not the petitioner is a taxable person

Rulings:

Taxation is the rule and exemption is the exception. MCIAAs exemption from payment of taxes is withdrawn by
virtue of Sections 193 and 234 of Labor Code. Statutes granting tax exemptions shall be strictly construed against
the taxpayer and liberally construed in favor of the taxing authority.

The petitioner cannot claim that it was never a taxable person under its Charter. It was only exempted from the
payment of realty taxes. The grant of the privilege only in respect of this tax is conclusive proof of the legislative
intent to make it a taxable person subject to all taxes, except real property tax.