UNIVERSITY OF ST.

LA SALLE
COLLEGE OF LAW

COURSE SYLLABUS
TAXATION 1

2nd SEM. AY 2014-2015

Atty. Julie Mae Salvador-Aguilar

I. General Principles of Taxation

A. Definition and concept of taxation

B. Nature of taxation
Art. VI, Sec. 28, Art. VI, 1987 Constitution
CIR vs. Reyes (480 SCRA 382, 377)
Hilado vs. CIR 100 Phil 288

C. Characteristics of taxation
Sison vs. Ancheta, 130 SCRA 654
CIR vs. Pineda, 21 SCRA 105
Phil. Guaranty vs. CIR, 13 SCRA 775
Collector vs. Yuseco, 3 SCRA 313

D. Power of taxation compared with other powers

1. Police power
2. Power of eminent domain

Roxas vs. CTA, 23 SCRA 276

Taada vs. Angara, GR 118295, May 2, 1997
LTO vs. City of Butuan, GR 131512, Jan. 20, 3000
Phil. Match Co. vs. Cebu, 81 SCRA 99
Matalin vs. Mun. Council of Malabang, 143 SCRA 404
Lutz vs. Araneta, 98 Phil 48
NTC vs. CA, 311 SCRA 508

E. Purpose of taxation
1. Revenue-raising
CIR vs. Algue, Inc., et. al. L-28896, 02/17/1988 168 SCRA 9
PAL vs. Edu. 164 SCRA 320
Tolentino vs. Secretary of Finance, 233 SCRA 630, 249 SCRA 628

2. Non-revenue/special or regulatory
Osmea vs. Orbos, 220 SCRA 703
Caltex vs. COA 208 SCRA 755
CIR vs. Central Luzon Drug Corp (456 SCRA 414, 445)

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F. Principles of sound tax system
1. Fiscal adequacy
2. Administrative feasibility
3. Theoretical justice

Chavez vs. Ongpin 186 SCRA 331

Taganito Mining vs. CIR, CTA Case 4702, April 28, 1995

G. Theory and basis of taxation

1. Lifeblood theory
2. Necessity theory
3. Benefits- protection theory (Symbiotic Relationship)
4. Jurisdiction over subject and objects

71 Am Jur 2nd 346-347

CIR vs. Algue, Inc., et. al., L-28896, 02/17/1988 168 SCRA 9
Philippine Guaranty Co. Inc. v. CIR 13 SCRA 775
NPC v. Cabanatuan, GR 149110, April 19, 2003
Lorenzo V. Posadas, 64 Phil 353

H. Doctrines in taxation
1. Prospectivity of tax laws
2. Imprescriptibility
3. Double taxation
a. Strict sense
b. Broad sense
c. Constitutionality of double taxation
d. Modes of eliminating double taxation

Procter & Gamble Co. vs. Mun. of Jagna , 94 SCRA 894

Sanchez vs. CIR, 97 Phil. 687
Punzalan vs. Municipal Board of Manila, 95 Phil. 46
CIR vs. SC Johnson & Sons, Inc. 309 SCRA 87
Villanueva vs. City of Iloilo, 26 SCRA 578
Ericsson Telecommunications, Inc. vs. City of Pasig, 538 SCRA 99, 114-115

4. Escape from taxation

a. Shifting of tax burden
1) Ways of shifting the tax burden
2) Taxes that can be shifted
3) Meaning of impact and incidence of taxation
b. Tax avoidance
c. Tax evasion

Sec. 254 NIRC

CIR vs. Toda GR 147188, 9/14/2004
Republic vs. Gonzales, 13 SCRA 633
Delpher Traders vs. IAC, 157 SCRA 349
CIR vs. Lincoln Philippine Lie, GR 119176, Mar. 19, 2002
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5. Exemption from taxation
a. Meaning of exemption from taxation
b. Nature of tax exemption
c. Kinds of tax exemption
1. Express
2. Implied
3. Contractual
d. Rationale/grounds for exemption
e. Revocation of tax exemption

Greenfield v. Meer, 77 Phil 394

Basco vs. PAGCOR, 196 SCRA 52
CIR vs. Botelho Shipping Corp.
CIR vs. CTA, GCL Retirement Plan, 207 SCRA 487
CIR vs. Guerrero, 21 SCRA 180
Philippine Acetylene Co., Inc. vs. CIR ,GR L-19707, 8/17/1967, 20 SCRA 1056
Maceda vs. Macaraig, Jr., 197 SCRA 771
Sea-Land Service vs. CA, 357 SCRA 441
Davao Gulf vs. CIR, GR 117359, July 23, 1998
PLDT vs. Davao City, GR 143867, Aug. 22, 2001

6. Compensation and set-off

7. Compromise
8. Tax amnesty
a. Definition
b. Distinguished from tax exemption
9. Construction and interpretation of
a. Tax laws
1) General rule
2) Exception
b. Tax exemption and exclusion
1) General rule
2) Exception
E. Rodriguez, Inc. vs. Collector, 23 SCRA 119
Republic Flour Mills vs. CIR, 31 SCRA 148
Luzon Stevedoring Corp. vs. CTA, 163 SCRA 647
Coconut Oil Refiners vs. Torres, GR 132527, July 29, 2005
Maceda vs. Macaraig, 196 SCRA 771, 223 SCRA 217

c. Tax rules and regulations

1) General rule only
d. Penal provisions of tax laws
e. Non-retroactive application to taxpayers
1) Exceptions
Lorenzo vs. Pozadas, Jr., et. al. 64 Phil 353

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I. Scope and limitation of taxation

1. Inherent Limitations
a. Public purpose
Lutz vs. Araneta, 98 Phil. 48
Pascual vs. Secretary of Public Works, 110 Phil 331

b. Inherently Legislative
1) General Rule

2) Exceptions:
i. Delegation to local governments
ii. Delegation to the President
iii. Delegation to administrative agencies

Sec. 5, Art. X, 1987 Constitution

Sec. 28(2), Art. VI, 1987 Constitution
Sec. 401, Tariff and Customs Code
Phil. Comm. Satellite Corp. vs. Alcuaz, 180 SCRA 219
Meralco vs. Province of Laguna, 306 SCRA 750
Pepsi-Cola Co. vs. City of Butuan, 24 SCRA 789
Smith Bell & Co. vs. CIR, L-28274, July 25, 1975
LTO vs. City of Butuan, supra
City Govt. of Quezon City vs. Bayantel, GR 162015
Abakada Guro Party List v. Ermita (469 SCRA 1, 122, 123-124)

c. Territorial
Manila Gas vs. Collector, 62 Phil 895
Vegetable Oil Corp. vs. Trinidad, 45 Phil 822
Wells Fargo Bank vs. Collector, 70 Phil 325
Iloilo Bottlers vs. Iloilo City, 164 SCRA 607
CIR vs. BOAC, 149 SCRA 395
Hopewell Power vs. Commissioner, CTA Case 5310, Nov. 18, 1998
Smith vs. Commissioner, CTA Case 6268, Sept. 12, 2002
Collector vs. Lara, 102 Phil. 813

1) Situs of taxation
i. Meaning
ii. Situs of income tax
(1) From sources within the Philippines
(2) From sources without the Philippines
(3) Income partly within and partly without the Philippines
iii. Situs of property taxes
(1) Taxes on real property
(2) Taxes on personal property
iv. Situs of excise tax
(1) Estate tax
(2) Donors tax
v. Situs of business tax
a. Sale of Real Property
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 b. Sale of Personal Property
c. VAT

d. International Comity
Sec. 2, Art. XI, 1987 Constitution
Taada vs. Angara, GR 118295, May 2, 1997
Mitsubishi Corp. vs. CIR, CTA Case 6139, Dec. 17, 2003

e. Exemption of government entities, agencies and instrumentalities

Sec. 27(C) and 30(I), NIRC
E.O. 93
PD 1931
Maceda vs. Macaraig
Mactan Cebu Airport vs. Marcos, GR 120082, Sept. 11, 1996
BIR Ruling No. 013-2004, Sept. 13, 2004

2. Constitutional Limitations

a. Provisions Directly Affecting Taxation

1) Prohibition against imprisonment for non-payment of poll tax

Sec. 20, Art. III, 1987 Constitution

2) Uniformity and equality of taxation

Sec. 28(1), Art. VI, 1987 Constitution
Pepsi-Cola vs. Butuan City, 24 SCRA 789
Manila Race Horse vs. dela Fuente, 88 Phil. 60
Sison vs. Ancheta, 130 SCRA 654
Tolentino vs. Sec. of Finance, 249 SCRA 628

3) Grant by Congress of authority to the President to impose tariff rates

4) Prohibition against taxation of religious, charitable s and educational institutions

Sec. 28(3), Art. VI, 1987 Constitution
Lladoc vs. CIR, 14 SCRA 292
Province of Abra vs. Hernando, 107 SCRA 1021
Abra Valley College vs. Aquino, 162 SCRA 106

5) Prohibition against taxation of non-stock, non-profit educational institutions

Sec. 4(3), Art. XIV, 1987 Constitution
Sec. 28(3), Art. VI, 1987 Constitution
Secs. 27(B) and 30(H), NIRC
DOF Order 137-87
DOF Order 149-95
BIR Revenue Memorandum Circular (RMC) No. 76-2003
BIR RMC No. 45-95]
BIR Revenue Regulations No. 13-98
CIR vs. CA & YMCA, 298 SCRA 83

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 6) Majority vote of Congress for grant of Tax Exemption
Sec. 24, Art. VI, 1987 Constitution
Sec. 28(4), Art. VI, 1987 Constitution
Tolentino vs. Secretary of Finance, 249 SCRA 628

7) Prohibition on use of tax levied for special purpose

8) Presidents veto power on appropriation, revenue, tariff bills

Sec. 27(2), Art. VI, 1987 Constitution

9) Non-impairment of the SC jurisdiction

Sec. 5(2)(b), Art VIII, 1987 Constitution

10) Grant of power to the local government units to create its own sources of revenue

11) Flexible tariff clause

12) Exemption from real property taxes

13) No appropriation or use of public money for religious purposes/Freedom of religious

worship
Sec. 5, Art. III, 1987 Constitution
American Bible Society vs. Manila, 101 Phil. 386

b. Provisions Indirectly Affecting Taxation

1) Due process
Sec. 1, Art III, 1987 Constitution
Commissioner of Customs vs. CTA & Campos Rueda Co., 152 SCRA 641
Phil. Bank of Commerce vs. CIR, 302 SCRA 241
Sison vs. Ancheta, 130 SCRA 654

2) Equal protection
Sec. 1, Art III, 1987 Constitution
Ormoc Sugar Co. vs. Treasurer of Ormoc City, 22 SCRA 603
Villegas vs. Hsui Chiong Tsai Pao, 86 SCRA 270
Shell Co. vs. Vano, 94 Phil. 388
Tiu vs. CA, 301 SCRA 279
Tan vs. Del Rosario, 237 SCRA 324
Phil. Rural Electric vs. Secretary, GR 143706, June 10, 2003

3) Religious freedom

4) Non-impairment of obligations on contracts

Sec. 10, Art III & Sec. 11, Art. XII, 1987 Constitution
CIR vs. Lingayen Gulf Electric Co. 164 SCRA 67
Misamis Oriental vs. CEPALCO, 181 SCRA 38
Phil. Rural Electric vs. Secretary

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J. Stages of Taxation
1. Levy
2. Assessment and Collection
3. Payment
4. Refund

K. Definition, nature and characteristics of Taxes

L. Requisites of a valid tax

M. Tax as distinguished from other forms of exactions

1. Tariff/Customs Duties

2. Toll
Diaz vs. Secretary of Finance
71 Am Jur 351

3. License fee
Progressive Dev. Corp. vs. QC, 172 SCRA 629
PAL vs. Edu, 164 SCRA 320
ESSO vs. CIR, 175 SCRA 149

4. Special assessment
Apostolic Prefect vs. Treasurer of Baguio, 71 Phil. 547

5. Debt
Caltex vs. COA, 208 SCRA 726
Francia vs. IAC, 162 SCRA 735
RP vs. Ericta and Sampaguita Pictures, 172 SCRA 653
Republic vs. Mambulao Lumber Company, 4 SCRA 622
Philex Mining vs. CIR, GR 125704, Aug. 28, 1998
Domingo vs. Carlitos, 8 SCRA 443

N. Kinds of Taxes

1. As to object
a. Personal, capitation or poll tax
b. Property tax
c. Privilege tax
2. As to burden or incidence
a. Direct
b. Indirect
3. As to tax rates
a. Specific
b. Ad valorem
c. Mixed

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 4. As to purposes
a. General or fiscal
b. Special, regulatory or sumptuary
Osmea vs. Orbos (220 SCRA 703)
5. As to scope or authority to impose
a. National
b. Local
6. As to graduation
a. Progressive
b. Regressive
c. Proportionate

II. Tax Remedies under the NIRC

A. Taxpayers Remedies

1. Assessment
a. Concept of assessment
1) Requisites for valid assessment
2) Constructive methods of income determination
3) Inventory method for income determination
4) Jeopardy assessment
5) Tax delinquency and tax deficiency

Commissioner of Internal Revenue vs. Court of Appeals (G.R. No. 104151)

Republic of the Philippines vs. Court of Appeals (149 SCRA 351)

b. Power of the Commissioner to make assessments and prescribe additional requirements

for tax administration and enforcement
1) Power of the Commissioner to obtain information, and to summon/examine, and take
testimony of persons

c. When assessment is made

1) Prescriptive period for assessment
a) False, fraudulent, and non-filing of returns
Mambulao Lumber Company vs. Republic (132 SCRA 1)

2) Suspension of running of statute of limitations

Republic vs. Hizon (320 SCRA 574)

d. General provisions on additions to the tax

1) Civil penalties
2) Interest

e. Assessment process
1) Tax audit
2) Notice of informal conference
3) Issuance of preliminary assessment notice (PAN)
4) Notice of informal conference
5) Issuance of preliminary assessment notice (PAN)

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 7) Reply to PAN
8) Issuance of formal letter of demand and assessment notice/final assessment notice
9) Disputed assessment
10) Administrative decision on a disputed assessment

f. Protesting assessment
1) Protest of assessment by taxpayer
a) Protested assessment
b) When to file a protest
c) Forms of protest
CIR vs. Villa (22 SCRA 3)

2) Submission of documents within 60 days from filing of protest

3) Effect of failure to protest

4) Period for the protest to be acted upon

g. Rendition of decision by Commissioner

1) Denial of protest
a) CIRs actions equivalent to denial of protest
(1) Filing of criminal action against taxpayer
(2) Issuing a warrant of distraint and levy

(b) Inaction by Commissioner

h. Remedies of taxpayer to action by Commissioner

1) In case of denial of protest
2) In case of inaction by Commissioner within 180 days
from submission of documents
3) Effect of failure to appeal

2. Collection
a. Requisites
b. Prescriptive periods
c. Distraint of personal property including garnishment
1) Summary remedy of distraint of personal property
a) Procedure for distraint and garnishment
b) Sale of property distrained and disposition of proceeds
(1) Release of distrained property upon payment prior to sale
c) Purchase by the government at sale upon distraint
d) Report of sale to BIR
e) Constructive distraint to protect the interest of the government

d. Summary remedy of levy on real property

1) Advertisement and sale
2) Redemption of property sold
3) Final deed of purchaser

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 e. Forfeiture to government for want of bidder
1) Remedy of enforcement of forfeitures
(a) Action to contest forfeiture of chattel
(b) Resale of real estate taken for taxes
(c) When property to be sold or destroyed
(d) Disposition of funds recovered in legal proceedings or obtained from forfeiture
f. Further distraint or levy
g. Tax lien
h. Compromise
1) Authority of the Commissioner to compromise and abate taxes
i. Civil and criminal actions
1) Suit to recover tax based on false or fraudulent returns

3. Refund
a. Grounds and requisites for refund
b. Requirements for refund as laid down by cases
1) Necessity of written claim for refund
2) Claim containing a categorical demand for reimbursement
3) Filing of administrative claim for refund and the suit/proceeding
before the CTA within 2 years from date of payment
regardless of any supervening cause

d. Legal basis of tax refunds

d. Statutory basis for tax refund under the Tax Code

1) Scope of claims for refund
2) Necessity of proof for claim or refund
3) Burden of proof for claim of refund
4) Nature of erroneously paid tax/illegally assessed collected
5) Tax refund vis--vis tax credit
6) Essential requisites for claim of refund

e. Who may claim/apply for tax refund/tax credit

1) Taxpayer/withholding agents of non-resident foreign corporation

e. Prescriptive period for recovery of tax erroneously or illegally collected

g. Other consideration affecting tax refunds

B. Government Remedies

1. Administrative remedies
a. Tax lien
b. Levy and sale of real property
c. Forfeiture of real property to the government for want of bidder
d. Further distraint and levy
e. Suspension of business operation
f. Non-availability of injunction to restrain collection of tax

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 2. Judicial remedies

3. Statutory Offenses and Penalties

a. Civil penalties
1) Surcharge
2) Interest
a) In General
b) Deficiency interest
c) Delinquency interest
d) Interest on extended payment

4. Compromise and Abatement of taxes

a. Compromise
CIR vs. Abad, etc. (G.R. No. L-19627, June 27, 1968)
b. Abatement

III. Organization and Function of the Bureau of Internal Revenue

A. Rule-making authority of the Secretary of Finance

1. Authority of Secretary of Finance to promulgate rules and regulations
2. Specific provisions to be contained in rules and regulations
3. Non-retroactivity of rulings
BIR Ruling No. 370-2011 Imposition of 20% withholding tax on PEACE bonds

B. Power of the Commissioner to suspend the business operation of a taxpayer

Oplan Kandado of the BIR

IV. Judicial Remedies; Republic Act 1125 The Act that Created the Court of Tax Appeals (CTA), as amended,
and the Revised Rules of the Court of Tax Appeals

A. Jurisdiction of the Court of Tax Appeals

1. Exclusive appellate jurisdiction over civil tax cases

a. Cases within the jurisdiction of the Court en banc
b. Cases within the jurisdiction of the Court in divisions

2. Criminal cases
a. Exclusive original jurisdiction
b. Exclusive appellate jurisdiction in criminal cases

B. Judicial Procedures

1. Judicial action for collection of taxes

a. Internal revenue taxes
b. Local taxes
1) Prescriptive period

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 2. Civil cases
a. Who may appeal, mode of appeal, effect of appeal
1) Suspension of collection of tax
a) Injunction not available to restrain collection
2) Taking of evidence
3) Motion for reconsideration or New trial
b. Appeal to the CTA, en banc
c. Petition for review on certiorari to the Supreme Court

3. Criminal cases
a. Institution and prosecution of criminal actions
1) Institution on civil action in criminal action

b. Appeal and period to appeal

1) Solicitor General as counsel for the People and government
officials sued in their official capacity

f. Petition for review on certiorari to the Supreme Court

C. Taxpayers suit impugning the validity of tax measures or acts of taxing authorities
a. Taxpayers suit, defined
b. Distinguished from citizens suit
c. Requisites for challenging the constitutionality of a tax measure
or act of taxing authority
1) Concept of locus standi as applied in taxation
2) Doctrine of transcendental importance
3) Ripeness for judicial determination

Maceda vs. Macaraig, Jr. (197 SCRA 771)

Gonzales vs. Marcos (65 SCRA 624)
Abaya vs. Ebdane (515 SCRA 720)

NOTE: Notwithstanding the listing of covered topics above, students are expected to study related topics
which they may encounter especially in the case assignments.

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