Mendoza VS Municipality of Meycauayan, 94 Phil 1047

Facts:
Mendoza, Santos & Co. appealed from the decision of the CFI of Bulacan denying the right of the former to reimbursement of taxes paid
except the sum of P1,757.15 (out of the sum of P11,611.35) for the reason that they were paid voluntarily. Ordinances nos. 1 and 18 of
the Municipality of Meycauayan was also declared null and void. The court ruled that municipal taxes should be paid under protest if they
are to be recovered in an ordinary action. despite the provision of Sec. 308 of the National Internal Revenue Code that a suit or proceeding
for the recovery of internal revenue taxes may be maintained whether or not they were paid under protest or duress.

Issue:
WON the CFI of Bulacan is correct in awarding Mendoza, Santos & Co. reimbursement of taxes of P1,757.15.

Held:
No. Letters sent to the Secretary of Finance questioning the legality of the ordinance and indirectly asking for the refund of the taxes
paid can be considered as a protest against the execution of the said taxes by the municipal council in contemplation of law. The Court
has already ruled that the Board resolution is null and void because it is ultra vires. The law does not require the approval of the Provincial
Board for the validity of municipal ordinances or resolutions. It only authorizes the Board to declare them invalid if in excess of its powers.

Gomez VS Palomar, GR No. L- 23645, 29 October 1968

FACTS:
Petitioner Benjamin Gomez questioned the constitutionality of RA 1635, or otherwise known as the “Anti- TB Stamp law” which purpose
is to raise funds for the Philippine Tuberculosis Society, for being violative of the equal protection clause. According to him, it constitute
mail users into a class for the purpose of the tax while leaving untaxed the rest of the population, and that even among postal patrons,
the statute discriminatorily grants exemptions.

The law in question requires an additional 5- centavo stamp for every mail being posted, and no mail shall be delivered unless bearing
the said stamp.

ISSUE:
WON the Anti-TB Stamp Law is unconstitutional for being violative of the equal protection clause.

HELD:
No. It is settled that the legislature has the inherent power to select the subjects of taxation and grant exemptions thereon. Traditionally,
classification has been a device for fitting tax programs to local need and usages in order to achieve an equitable distribution of the tax
burden.

Garcia VS Executive Sec, GR No. 101273, 3 July 1992

FACTS:
EO 475 was issued by the President, reducing the rate of additional duty on all imported articles from nine percent (9%) to five percent
(5%) ad valorem, except in the cases of crude oil and other oil products which continued to be subject to the additional duty of nine
percent (9%) ad valorem. Seven (7) days later, the President issued Executive Order No. 478, which levied (in addition to the
aforementioned additional duty of nine percent (9%) ad valorem and all other existing ad valorem duties) a special duty of P0.95 per
liter or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products.

ISSUE:
WON EO 475 and 478 are constitutional.

HELD:
YES. Under Section 24, Article VI of the Constitution, the enactment of appropriation, revenue and tariff bills, like all other bills is, of
course, within the province of the Legislative rather than the Executive Department. It does not follow, however, that therefore
Executive Orders Nos. 475 and 478, assuming they may be characterized as revenue measures, are prohibited to the President, that
they must be enacted instead by the Congress of the Philippines.

Pepsi Bottling Co VS City of Butuan, GR No. L- 22814, 28 August 1968

FACTS:
Pepsi-Cola Bottling Company of the Philippines, is a domestic corporation. On August 16, 1960, the City of Butuan enacted Municipal
Ordinance No. 110 which provides for the payment by "any agent and/or consignee" of any dealer "engaged in selling liquors, imported
or local, in the City a tax of P0.10 per case of 24 bottles of the soft drinks and carbonated beverages (Sections 2 - 3 of the ordinance).
Later, Pepsi paid the amount P14,177.03 under protest covering the period of August 16, 1960 to July 30, 1961. Thereafter, Pepsi filed
an action in the court seeking to recover the sums it paid to the City of Butuan pursuant to its Municipal Ordinance No. 110, as amended
by Municipal Ordinance No. 122, both series of 1960 on the ground that said municipal ordinance was null and void. Municipal Ordinance
No. 110.

ISSUE:
WON the municipal ordinance is valid.

RULING:
No. Ordinance 110 of the City of Butuan, as amended by Ordinance No. 122, imposes a tax of P0.10 per case of 24 bottles of soft drinks
or carbonated drinks only upon "any agent and/or consignee of any person, association, partnership, company or corporation engaged
in selling . . . soft drinks or carbonated drinks." As such, the tax partakes of the nature of an import duty which is beyond defendant’s
authority to impose by express provision of law. For, as a consequence of such measure, merchants engaged in the sale thereof are not
subject to the tax unless they are agents and/or consignees of another dealer, who, in the very nature of things, must be one engaged
in business outside the City.
1
 Wells Fargo Bank and Union Trust VS CIR, GR No. L- 46720, 28 June 1940

Facts:
Birdie Lillian Eye, wife of Clyde Milton Eye, died at Los Angeles, California, the place of her alleged last residence and domicile. Among
the properties she left is her one-half conjugal share in 70,000 shares of stock in the Benguet Consolidated Mining Company, an
anonymous partnership (sociedad anonima), organized and existing under the laws of the Philippines. She left a will which was duly
admitted to probate in California where her estate was administered and settled, wherein Wells Fargo Bank & Union Trust Company was
duly appointed trustee thereof.

Issue:
WON the Philippine Government has the power to impose inheritance tax on the shares of stocks of the decedent.

Ruling:
Yes. In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein. And besides,
the certificates of stock have remained in this country up to the time when the deceased died in California, and they were in possession
of one McKee, secretary of the Benguet Consolidated Mining Company, to whom they have been delivered and indorsed in blank. This
indorsement gave McKee the right to vote the certificates at the general meetings of the stockholders, to collect dividends, and dispose
of the shares in the manner she may deem fit, without prejudice to her liability to the owner for violation of instructions.

CIR VS British Overseas Airways, GR No. 65773-74, 30 April 1987

FACTS:
Petitioner Commission on Internal Revenue (CIR) seeks a review on certiorari of the joint Decision of the Court of Tax Appeals (CTA),
which set aside petitioner’s assessment of deficiency income taxes of respondent British Overseas Airways Corporation (BOAC) for fiscal
years 1959-1967, 1968-69, 1970-71.

ISSUE:
WON the revenue derived by BOAC from ticket sales in the Philippines constitute income from Philippine sources and accordingly, be
taxable.

HELD:
Yes. The source of income is the property, activity or service that produced the income. For the source of income to be considered as
coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines.

Tolentino VS Sec. of Finance, GR No. 115455, 25 August 1994

FACTS:
Republic Act No. 7716, or the Expanded Value-Added Tax Law, was enacted sometime in 1994. This act seeks to widen the tax base of
the existing VAT system and enhance its administration by amending the National Internal Revenue Code. After its enactment, various
suits questioning and challenging the constitutionality of RA 7716 on various grounds was instituted by several parties. One of the
substantive issues raised was that RA 7716 violate Article VI Section 28 (1) and Section 28 (3) of the Constitution.

ISSUE:
WON RA 7716 violate these constitutional provisions.

RULING:
NO. Lacking empirical data on which to base any conclusion regarding these arguments, any discussion whether the VAT is regressive in
the sense that it will hit the "poor" and middle-income group in society harder than it will the "rich," as the Cooperative Union of the
Philippines (CUP) claims in G.R. No. 115873, is largely an academic exercise. Nor is the contention of the Chamber of Real Estate and
Builders Association (CREBA), petitioner in G.R. 115754, that the VAT will reduce the mark up of its members by as much as 85% to
90% any more concrete. It is a mere allegation. On the other hand, the claim of the Philippine Press Institute, petitioner in G.R. No.
115544, that the VAT will drive some of its members out of circulation because their profits from advertisements will not be enough to
pay for their tax liability, while purporting to be based on the financial statements of the newspapers in question, still falls short of the
establishment of facts by evidence so necessary for adjudicating the question whether the tax is oppressive and confiscatory.

Sison Jr VS Ancheta, GR No. 59431, 25 July 1984

FACTS:
Sison as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the imposition of higher rates of tax upon
his income arising from the exercise of his profession vis-a-visthose which are imposed upon fixed income or salaried individual
taxpayers. 4 He characterizes the above section as arbitrary amounting to class legislation, oppressive and capricious in character 5 For
Sison, therefore, there is a transgression of both the equal protection and due process clauses 6 of the Constitution as well as of the rule
requiring uniformity in taxation.

ISSUE:
WON a bare allegation that Batas 135, which sets different income tax schedules for fixed income earners and business or professional
income earners, is arbitrary does not suffice to invalidate said tax statute.

HELD:
YES. A mere allegation, as here does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that
Sison here would condemn such a provision as void or its face, he has not made out a case. This is merely to adhere to the authoritative
doctrine that were the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad
standards, there is a need for of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption
of validity must prevail.

2
 Maceda VS Macaraig, GR No. 88291, 8 June 1993

FACTS:
The petition seeks to nullify decisions, orders, ruling and resolutions of respondent Macaraig, for exempting National Power Corporation
(NAPOCOR) from indirect taxes and duties. Commonwealth Act 120 created the NAPOCOR as a public corporation to undertake the
development of hydraulic power and the production of power from other sources. Republic Act No. 358 granted NAPOCOR tax and duty
exemption privileges to facilitate payment of its indebtedness.

ISSUE:
WON NAPOCOR has ceased to enjoy indirect tax and duty exemptions with the enactment of PD No. 938 on 1976, which amended PD
No. 380 issued on 1974.

HELD:
No. It is still exempt. NAPOCOR is a non-profit public corporation created for the general good and welfare, and wholly owned by the
government of the Republic of the Philippines. From the very beginning of the corporation’s existence, NAPOCOR enjoyed preferential
tax treatment “to enable the corporation to pay the indebtedness and obligation” and effective implementation of the policy enunciated
in Section 1 of RA 6395. From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be interpreted
liberally so as to enhance the tax exempt status of NAPOCOR.

CIR VS CTA, GR No. 70648, 31 July 1987

Facts:
Campos Rueda Corporation imported goods (tungsol flashers and sealed beams) from the United States. However, the Bureau of Customs
re-appraised the two shipments based on an "Alert Notice" sent by Finance Attaches abroad. Campos Rueda Corporation paid the
increased duties and taxes but filed at the same time Protests for refund of the excess paid to the Collector of Customs. The Protests
was denied and appealed to the Commissioner of Customs which affirmed in toto the consolidated Decision appealed from on the ground
that "Alert Notices are sent by Finance Attaches in their official capacity as such officials, aware of their bounden duty to keep the
Department of Finance abreast with the current prices of commodities for the imposition of correct amount of duties and taxes on taxable
importations."

Issue:
WON the re-appraisal of shipments made by the Commissioner of Customs was in accordance with Section 201 of the Tariff and Customs
Code of the Philippines (RA No. 1937), as amended by PD Nos. 34 and 1464.

Held:
NO. The Court held that the respondent's re-appraisal of the subject shipments or articles imported were based on the alleged piece of
document known as "Alert Notice" which was not even presented by respondent to the Court. At any rate, assuming that there really is
such a document and the same was received by the Commissioner of Customs, the fact is that the records do not show from what data
the alleged alerted value was taken, and how the Commissioner of Customs ascertained and established the home consumption value of
the imported articles and/or merchandise and when and where such alerted value was published as required by law.

Manila Times Publishing Co. VS CIR, CTA Case 2263

FACTS:
On June 27, 1968, R.A. No. 5431 was approved which amended Section 24 of the revenue code increasing the rates of corporate income
tax on the first P100,000 net income from 22% to 35% and on the amount in excess of P100,000 from 30% to 35%. Section 10 of the
law provides that the Act shall apply to income for taxable years beginning June 30, 1968. On a memorandum released by the BIR, this
increase was set to apply on income earned beginning July 1, 1968.

ISSUE:
WON the increased rates should apply on income earned on January 1, 1969 and as such entitles Manila Publishing to a tax credit.

RULING:
YES. As defined by law and applicable jurisprudence, taxable year refers to a period of twelve uninterrupted months. For this purpose,
the calendar year corporations have a taxable year beginning January 1 and ending December 31. To subscribe to CIR’s contention would
be to veer away from the clear and explicit mandate of the law.

Ormoc Sugar VS Treasurer of Ormoc City, GR No. L- 23794, 17 February 1968

Facts:
On January 29, 1964, the Municipal Board of Ormoc City passed 1 Ordinance No. 4, Series of 1964, imposing "on any and all productions
of centrifugal sugar milled at the Ormoc Sugar Company, Inc., in Ormoc City a municipal tax equivalent to one per centum (1%) per
export sale to the United States of America and other foreign countries." 2

ISSUE:
WON the constitutional limits on the power of taxation, specifically the equal protection clause and rule of uniformity of taxation, were
infringed.

HELD:
YES. The Constitution in the bill of rights provides: ". . . nor shall any person be denied the equal protection of the laws." (Sec. 1 [1],
Art. III) In Felwa vs. Salas, 5 the court ruled that the equal protection clause applies only to persons or things identically situated and
does not bar a reasonable classification of the subject of legislation, and a classification is reasonable where (1) it is based on substantial
distinctions which make real differences; (2) these are germane to the purpose of the law; (3) the classification applies not only to
present conditions but also to future conditions which are substantially identical to those of the present; (4) the classification applies only
to those who belong to the same class.

3
 Radio Communication of the Phils. VS CIR, GR No. 60547, 11 July 1985

FACTS:
Under its original franchise, RA No. 2036, petitioner RCPI was subjected to both the franchise tax and income tax. In 1964, petitioner’s
franchise was amended by RA No. 4054 to the effect that its franchise tax of 1 and 1⁄2% of all gross receipts was provided as in lieu of
any and all taxes of any kind and nature. In 1968, RA No. 4054 was repealed by RA No. 5431, which withdrew the exemption and
subjected RCPI to taxes upon their taxable net income as imposed upon associations or corporations engaged in a similar business or
industry.

ISSUE:
WON the exemptions granted upon RCPI under RA No. 4054 was repealed by RA No. 5431

HELD:
Yes. An examination of Section 24 of the Tax Code as amended shows clearly that the law intended all corporate taxpayers to pay income
tax as provided by the statute. There can be no doubt as to the power of Congress to repeal the earlier exemption it granted.

Tan VS Del Rosario, GR No. 109289, 3 October 1994

Facts:
Two consolidated special civil actions for prohibition were heard by the Supreme Court. In G.R. No. 109289, Rufino R. Tan challenged
the constitutionality of Republic Act No. 7496, also commonly known as the Simplified Net Income Taxation Scheme ("SNIT"), amending
Sections 21 (Tax on citizens or residents) and 29 (Deductions from gross income) of the National Internal Revenue Code. and, in G.R.
No. 109446, Carag, Caballes, Jamora & Zomera Law Offices, et al. questions the validity of Section 6, Revenue Regulations No. 2-93,
promulgated by Ramon R. del Rosario, Jr., as Secretary of Finance & Jose U. Ong, as Commissioner of Internal Revenue.

Issue:
WON RA 7496 violates the objectives of the constitutional provision on titles of bills.

Held:
NO. The Court held that Article VI, Section 26(1), of the Constitution has been envisioned so as (a) to prevent log-rolling legislation
intended to unite the members of the legislature who favor any one of unrelated subjects in support of the whole act, (b) to avoid
surprises or even fraud upon the legislature, and (c) to fairly apprise the people, through such publications of its proceedings as are
usually made, of the subjects of legislation. The above objectives of the fundamental law appear to us to have been sufficiently met.
Anything else would be to require a virtual compendium of the law which could not have been the intendment of the constitutional
mandate.

CIR VS CA, GR No. 115349, 18 April 1997

Facts:
AdMU is a non-stock, non-profit educational institution with auxiliary units and branches all over the Philippines. One such auxiliary unit
is the Institute of Philippine Culture (IPC), which has no legal personality separate and distinct from that of private respondent. The IPC
is a Philippine unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research
activities from international organizations, private foundations and government agencies. AdMU received from CIR a demand letter
assessing it to pay the sum of P174,043.97 for alleged deficiency contractor's tax and the sum of P1,141,837 for alleged deficiency
income tax. AdMU denied such tax liabilities and filed with the CIR contesting the validity of the assessments. CIR cancelled the
assessment for deficiency income tax but modifying the assessment for deficiency contractor's tax by increasing the amount due to
P193,475.55. Later on, CIR issued a final decision reducing the assessment for deficiency contractor's tax from P193,475.55 to
P46,516.41, exclusive of surcharge and interest. CTA cancelled the tax assessment. CA affirmed CTA.

Issue:
WON AdMU through its auxiliary unit or branch (IPC) is performing the work of an independent contractor and, thus, subject to the three
percent contractor's tax levied by then Section 205 of the National Internal Revenue Code.

Ruling:
No. To fall under its coverage, Section 205 of the NIRC requires that the independent contractor be engaged in the business of selling
its services. Hence, to impose the three percent contractor's tax on AdMU's IPC, it should be sufficiently proven that AdMU is indeed
selling its services for a fee in pursuit of an independent business. And it is only after AdMU has been found clearly to be subject to the
provisions of Sec. 205 that the question of exemption therefrom would arise. Only after such coverage is shown does the rule of
construction — that tax exemptions are to be strictly construed against the taxpayer — come into play, contrary to petitioner's position.

Abra Valley VS Aquino, GR No. L- 39086, 15 June 1988

Facts:
Abra Valley Junior College, Inc., an educational corporation and institution of higher learning duly incorporated with the SEC, filed a
complaint to annul and declare void the "Notice of Seizure' and the "Notice of Sale" of its lot and building for non-payment of real estate
taxes and penalties amounting to P5,140.31. The properties were sold at public auction for the satisfaction of the unpaid real property
taxes thereon and the same was sold to Millare who offered the highest bid, and a Certificate of Sale in his favor was issued by the
Municipal Treasurer.

Issue:
WON the lot and building in question are used exclusively for educational purposes.

Ruling:
The test of exemption from taxation is the use of the property for purposes mentioned in the Constitution. It must be stressed however,
that while this Court allows a more liberal and non-restrictive interpretation of the phrase "exclusively used for educational purposes" as
provided for in Article VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always been made that
exemption extends to facilities which are incidental to and reasonably necessary for the accomplishment of the main purposes.
4
 Surigao Consolidated Mining Co VS CIR, L- 148787

Facts:
Before the outbreak of World War II, the Surigao Consolidated Mining Company, was operating its mining concessions in Surigao.
Pursuant to section 246 of the Internal Revenue Code, which prescribes the time and manner of payment of royalties or ad valorem taxes,
it filed a bond and had been regularly filing its returns for minerals removed from its mines during each calendar quarter and paying ad
valorem tax thereon within 20 days after the close of every quarter.

Issue:
WON Surigao Consolidated is entitled to the refund of ad valorem tax.

Ruling:
No. It is a settled doctrine that in a suit for the recovery of the payment of taxes or any portion thereof as having been illegally or
erroneously collected, the burden is upon the taxpayer to establish the facts which show the illegality of the tax or that the
determination thereof is erroneous. In this case, Surigao Consolidated failed to show that the amount of taxes sought to be refunded
have been erroneously collected.

Phil. Rural Electric VS Secretary, GR No. 143706, 10 June 2003

Facts:
Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA) is an association of 119 electric cooperatives throughout the country.
Petitioners Agusan del Norte Electric Cooperative, Inc. (ANECO), Iloilo I Electric Cooperative, Inc. (ILECO I) and Isabela I Electric
Cooperative, Inc. (ISELCO I) are non-stock, non-profit electric cooperatives organized and existing under P.D. No. 269 (National
Electrification Administration Decree), as amended, and registered with the National Electrification Administration (NEA). Section 39 of
P.D. No. 269 provides for the following tax incentives to electric cooperatives.

Issue:
WON Congress may effectively withdraw the tax exemptions enjoyed by the members of PHILRECA despite the constitutional mandate
that LGUs shall enjoy local autonomy.

Ruling:
Yes. The Constitutional mandate that every local government unit shall enjoy local autonomy, does not mean that the
exercise of power by local governments is beyond regulation by Congress. Thus, while each government unit is granted the
power to create its own sources of revenue, Congress, in light of its broad power to tax, has the discretion to determine the
extent of the taxing powers of local government units consistent with the policy of local autonomy.

CIR vs Lingayen Gulf Electric, GR No. L-23771, 4 August 1988

Facts:
Lingayen Gulf Electric Power Co., Inc. (LGEPCI), operates an electric power plant pursuant to the municipal franchise granted it by their
respective municipal councils in Pangasinan, wherein Sec. 10 thereof provides: The said grantee in consideration of the franchise hereby
granted, shall pay quarterly into the Provincial Treasury of Pangasinan, 1% of the gross earnings obtained thru this privilege during the
first twenty years and 2% during the remaining fifteen years of the life of said franchise.

Issue:
WON Section 259 of RA 3843 is unconstitutional.

Ruling:
No. Section 4 of R.A. No. 3843 does not violate the equal protection clause of the constitution. A tax is uniform when it operates with
the same force and effect in every place where the subject of it is found. Uniformity means that all property belonging to the same class
shall be taxed alike. The Legislature has the inherent power not only to select the subjects of taxation but to grant
exemptions. Tax exemptions have never been deemed violative of the equal protection clause. Thus, by virtue of R.A- No. 3843, the
private respondent was liable to pay only the 2% franchise tax, effective from the date the original municipal franchise was granted.

CIR VS Algue, Inc., GR No. L- 28896, 17 February, 1998

Facts:
Algue Inc. is a domestic corporation engaged in engineering, construction and other allied activities. It received a letter from the CIR
regarding its delinquency income taxes from 1958-1959, amounting to P83,183.85. A letter of protest or reconsideration was filed by
Algue Inc. However, it was informed that the BIR was not taking any action on the protest. CIR contends that the claimed deduction of
P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense; payments are fictitious
because most of the payees are members of the same family in control of Algue and that there is not enough substantiation of such
payments.

Issue:
WON the CIR correctly disallowed the P75,000.00 deduction claimed by Algue as legitimate business expenses in its income tax returns.

Ruling:
No. Sec. 30 of the Tax Code provides: “allowed deductions in the net income – Expenses - All the ordinary and necessary expenses paid
or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other
compensation for personal services actually rendered.” It is the burden is on the taxpayer to prove the validity of the claimed deduction.
In this case, Algue Inc. has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the
payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new
business requiring millions of pesos.

5
 CIR VS Tokyo Shipping Co., Ltd, GR No. 68252

Facts:
Tokyo Shipping is a foreign corporation represented in the Philippines by Soriamont Steamship Agencies and owns and operates M/V
Gardenia. NASUTRA 2 chartered M/V Gardenia to load 16,500 metric tons of raw sugar in the Philippines. Soriamont Agency paid the
required income and common carrier's taxes with a total P107,142.75. Upon arriving, however, at Guimaras Port of Iloilo, the vessel
found no sugar for loading. NASUTRA and Soriamont mutually agreed to have the vessel sail for Japan without any cargo. Claiming the
pre-payment of income and common carrier's taxes as erroneous since no receipt was realized from the charter agreement, Tokyo
Shipping instituted a claim for tax credit or refund of the sum P107,142.75 from CIR.

Issue:
WON Tokyo Shipping Co. Ltd., is entitled to a refund or tax credit – whether it was able to prove that it derived no receipts from its
charter agreement, and hence is entitled to a refund of the taxes it pre-paid to the government.

Ruling:
Yes. Pursuant to Section 24 (b) (2) of the National Internal Revenue Code which at that time, a resident foreign corporation engaged in
the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines. Thus, before
such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines.

BPI Family Savings Bank VS CA, GR No. 122480

Facts:
BPI Family Savings Bank had an excess withholding taxes for the year 1989 amounting to P112,491.90. It indicated in its 1989 Income
Tax Return that it would apply the said amount as a tax credit for the succeeding taxable year, 1990. However, because of business
losses, BPI informed the BIR that it would claim the amount as a tax refund, instead of applying it as a tax credit. BIR made no action.
The CTA and the CA, however, denied the claim for tax refund. Since petitioner declared in its 1989 Income Tax Return that it would
apply the excess withholding tax as a tax credit for the following year, the Tax Court held that BPI was presumed to have done so.

Issue:
WON BPI is entitled to the refund of P112,491.90, representing excess creditable withholding tax paid for the taxable year 1989.

Ruling:
Yes. It is undisputed that petitioner had excess withholding taxes for the year 1989 and was thus entitled to a refund amounting to
P112,491. Pursuant to Section 69 of the 1986 Tax Code which states that a corporation entitled to a refund may opt either (1) to obtain
such refund or (2) to credit said amount for the succeeding taxable year. BPI presented evidence to prove its claim that it did not apply
the amount as a tax credit.

De Borja VS Gella, GR No. L- 18330, 31 July 1963

FACTS:
Jose de Borja has been delinquent in the payment of his real estate taxes since 1958 and has offered to pay them with two negotiable
certificates of indebtedness to which he is only an assignee. These were rejected by the City treasurers of both Manila and Pasay cities
on the ground of their limited negotiability. Borja brought the question to the Treasurer of the Philippines who opined that the negotiable
certificates cannot be accepted as payment of real estate taxes inasmuch as the law provides for their acceptance from their backpay
holder only or the original applicant himself, but not his assignee. Lower court ruled in favor of Borja.

ISSUE:
Whether Borja may apply to the payment of his real estate taxes the certificates of indebtedness he holds; while, respondents have the
correlative legal duty to accept the certificates in payment of the taxes.

RULING:
No, the respondents are not duty bound to accept the negotiable certificates of indebtedness for the simple reason that they were not
obligations subsisting at the approval of RA 304 which took effect on June 18, 1948. Under RA 304, payment through a certificate of
indebtedness may be allowed if the tax is owed by the applicant himself. This is the correct implication that may be drawn from the use
by the law of the words "his taxes". Furthermore, the right to use the backpay certificate in settlement of taxes is given only to the
applicant himself.

Philippines Airlines VS Secretary of Finance, GR No. 115852, 30 October 1995

Facts:
VAT is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to
10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from
the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its
administration by amending the NIRC.

Issue:
WON this amendment of Section 103 of the NIRC is fairly embraced in the title of Republic Act No. 7716, although no mention is made
therein of P. D. No. 1590.

Ruling:
Yes. The title states that the purpose of the statute is to expand the VAT system, and one way of doing this is to widen its base by
withdrawing some of the exemptions granted before. To insist that P. D. No. 1590 be mentioned in the title of the law, in addition to
Section 103 of the NIRC, in which it is specifically referred to, would be to insist that the title of a bill should be a complete index of its
content.

6
 Philippines Bank of Communications VS CIR, GR No. 119204

Facts:
PBCom, a commercial banking corporation duly organized under Philippine laws, filed its quarterly income tax returns for the first and
second quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00. The taxes due were settled by applying
PBCom's tax credit memos. Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the
year-ended December 31, 1986, and likewise reported a net loss of P14,129,602.00, and thus declared no tax payable for the year. But
during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR withholding
creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986.

ISSUE:
WON PBCom’s plea for tax refund or tax credits must be denied.

HELD:
Yes. Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate funds for the State to finance
the needs of the citizenry and to advance the common weal. Due process of law under the Constitution does not require judicial
proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means
to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be
summary and interfered with as little as possible.

Sunio, et al. VS NLRC, GR No. 57767

Facts:
On July 30,1973, EMRACO and CIPI are sister corporations they sold an ice plant to RDFC with a mortgage on the same properties
constituted by the RDFC in favor of EMRACO to secure the payment of the balance of the purchase price.

ISSUE:
WON NLRC acted with grave abuse of on amounting to lack of jurisdiction in ordering the reinstatement of private respondents and the
payment of their backwages?

RULING:
Yes. It is true that the sale of a business of a going concern does not ipso facto terminate the employer-employee relations insofar as
the successor-employer is concerned, and that change of ownership or management of an establishment or company is not one of the
just causes provided by law for termination of employment. The situation here, however, was not one of simple change of ownership.
Of note is the fact that when, on July 30, 1973, EMRACO-CIPI sold the plant to RDFC, CIPI had terminated the services of its employees,
including herein private respondents, giving them their separation pay which they had accepted.

MCIAA VS Marcos, GR No. 120082

Facts:
Since the time of the creation of Mactan Cebu International Airport Authority (MCIAA), it enjoyed the privilege of exemption from payment
of realty taxes in accordance with Section 14 of its Charter. However, the Office of the Treasurer of the City of Cebu, demanded payment
for realty taxes on several parcels of land belonging to MCIAA. MCIAA objected to such demand for payment as baseless and unjustified,
claiming in its favor the aforecited Section 14 of RA 6958 which exempts it from payment of realty taxes. 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
which puts limitations on the taxing powers of LGUs.

Issues:
WON City of Cebu has no power nor authority to impose realty taxes upon MCIAA.

Ruling:
Yes. Considering its task "not merely to efficiently operate and manage the Mactan-Cebu International Airport, but more importantly, to
carry out the Government policies of promoting and developing the Central Visayas and Mindanao regions as centers of international
trade and tourism, and accelerating the development of the means of transportation and communication in the country," and that it is
an attached agency of the DOTC, MCIAA "may stand in [sic] the same footing as an agency or instrumentality of the national government."

Luzon Stevedoring Corp. VS CTA, et al., GR No. L- 30232

FACTS:
Luzon Stevedoring Co. seeks to secure a tax refund from the Commissioner of Internal Revenue for its payment of compensating tax in
importing engine parts and other equipment for the repair and maintenance of its tugboats. It contends that tugboats are included in
the term cargo vessel under the tax exemption provisions of Section 190 of the Revenue Code, as amended by Republic Act 3176; that
the law treats a tugboat towing a barge loaded with cargoes for loading and unloading to constitute a single vessel. Thus, the engines,
spare parts and equipment imported by it to repair and maintain its tugboats are exempt from compensating tax.

ISSUE:
WON Luzon Stevedoring’s “tugboats” are considered "cargo vessels" subject to compensating tax exemption under the law?

HELD:
No, the instant petition is without merit. The law, specifically the amendatory provisions of Republic Act 3176, limits tax exemption from
the compensating tax to imported items to be used by the importer himself as operator of passenger or cargo vessel or both, whether
coastwise or oceangoing, including engines and spare parts of said vessel. Here, the petitioner’s "tugboats" are not "cargo vessels"
because they are mainly employed for towing and pulling purposes, not in carrying or transporting passengers or cargoes. In fact, a
tugboat is defined as a strongly built, powerful steam or power vessel, used for towing and, now, also used for attendance on vessel.

Chavez VS Ongpin, GR No. 76778

FACTS:
The petitioner, Francisco I. Chavez, is a taxpayer and an owner of three parcels of land. He alleges the following: that Executive Order
7
No. 73 accelerated the application of the general revision of assessments to January 1, 1987 thereby mandating an excessive increase
in real property taxes by 100% to 400% on improvements, and up to 100% on land; that any increase in the value of real property
brought about by the revision of real property values and assessments would necessarily lead to a proportionate increase in real property
taxes; that sheer oppression is the result of increasing real property taxes at a period of time when harsh economic conditions prevail;
and that the increase in the market values of real property as reflected in the schedule of values was brought about only by inflation and
economic recession.

ISSUE:
WON EO73 is unconstitutional.

Ruling:
NO. We agree with the Office of the Solicitor General that the attack on Executive Order No. 73 has no legal basis as the general revision
of assessments is a continuing process mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464
which should be challenged as constitutionally infirm. However, the other allegation of ROAP that Presidential Decree No. 464 is
unconstitutional, is not proper to be resolved in the present petition. As stated at the outset, the issue here is limited to the constitutionality
of Executive Order No. 73.

Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas VS Tan, GR No. 81311

FACTS:
These four (4) petitions, which have been consolidated because of the similarity of the main issues involved therein, seek 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:
WON VAT is unconstitutional, oppressive, discriminatory, regressive and violates due process and equal protection clause.

RULING:
No. Before resolving the issues raised, a brief look into the tax law in question is in order.

The VAT is a tax levied on a wide range of goods and services. It is a tax on the value, added by every seller, with aggregate gross
annual sales of articles and/or services, exceeding P200,00.00, to his purchase of goods and services, unless exempt. VAT is computed
at the rate of 0% or 10% of the gross selling price of goods or gross receipts realized from the sale of services.

Patalinghug VS CA, GR No. 104786

FACTS:
On November 17, 1982, the Sangguniang Panlungsod of Davao City enacted Ordinance No. 363, series of 1982 otherwise known as the
"Expanded Zoning Ordinance of Davao City," Section 8 of which states: “3.1 Funeral Parlors/Memorial Homes with adequate off street
parking space (see parking standards of P.D. 1096) and provided that they shall be established not less than 50 meters from any
residential structures, churches and other institutional buildings.”

ISSUE:
WON a tax declaration is conclusive of the nature of the property for zoning purposes.

Ruling:
No. A property may have been declared by its owner as residential for real estate taxation purposes but it may well be within a commercial
zone. A discrepancy may thus exist in the determination of the nature of property for real estate taxation purposes vis-a-vis the
determination of a property for zoning purposes.

Taganito Mining VS CIR, CTA Case 4702, 28 April 1995

Facts:
Taganito Mining Corporation (TMC) is a domestic corporation expressly granted a permit by the government via operating a contract to
explore, develop, and utilize mineral deposits found in a specified portion of a mineral reservation area located in Surigao del Norte and
owned by the Government. In exchange, TMC is obliged to pay royalty to the government over and above other taxes. During July to
December 1989, TMC removed, shipped and sold substantial quantities of Beneficiated Nickel Silicateore and chromite ore and paid excise
taxes in the amount of Php6,277,993.65 incompliance with Sec.151(3) of the Tax Code.

Issues:
WON TMC is entitled to tax refund.

Ruling:
NO. Tax refund partake of the nature of an exemption, and as such, tax exemption cannot be allowed unless granted in the most explicit
and categorical language. Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the
motive power to activate and operate it.

Roxas VS CTA, 23 SCRA 276

Facts:
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 amounting 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 of which is
that 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.

8
Issue:
WON Roxas y Cia be considered a real estate dealer because it engaged in the business of selling real estate.

Ruling:
NO, because of an isolated transaction. A Real estate dealer is defined as “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.

Tañada VS Angara, GR No. 118295

Facts:
Petitioners prayed for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the
President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and for the
prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of public officials
and employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned
therewith.

Issue:
WON provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine sovereignty
specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is ‘vested in the Congress of the Philippines.

Held:
No, the WTO agreement does not unduly limit, restrict, and impair the Philippine sovereignty, particularly the legislative power granted
by the Philippine Constitution. The Senate was acting in the proper manner when it concurred with the President’s ratification of the
agreement.

LTO VS City of Butuan, GR No. 131512

Facts:
Relying on the fiscal autonomy granted to LGU's by the Constittuion and the provisons of the Local Government Code, the Sangguniang
Panglunsod of the City of Butuan enacted an ordinance "Regulating the Operation of Tricycles-for-Hire, providing mechanism for the
issuance of Franchise, Registration and Permit, and Imposing Penalties for Violations thereof and for other Purposes." The ordinance
provided for, among other things, the payment of franchise fees for the grant of the franchise of tricycles-for-hire, fees for the registration
of the vehicle, and fees for the issuance of a permit for the driving thereof.

Issue:
WON the registration of tricycles was given to LGU's, hence the ordinance is a valid exercise of police power.

Ruling:
No. Based on the-"Guidelines to Implement the Devolution of LTFRBs Franchising Authority over Tricycles-For-Hire to Local Government
units pursuant to the Local Government Code"- the newly delegated powers to LGU's pertain to the franchising and regulatory powers
exercised by the LTFRB and not to the functions of the LTO relative to the registration of motor vehicles and issuance of licenses for the
driving thereof. Corollarily, the exercised of a police power must be through a valid delegation. In this case the police power of registering
tricycles was not delegated to the LGU’s, but remained in the LTO.

Matalin VS Municipal Council of Malabang, 142 SCRA 404

FACTS:
Municipal Council of Malabang, Lanao del Sur, invoking the authority of Section 2 of Republic Act No. 2264, otherwise known as the Local
Autonomy Act, enacted Municipal Ordinance No. 45-46, entitled "AN ORDINANCE IMPOSING A POLICE INSPECTION FEE OF P.30 PER
SACK OF CASSAVA STARCH PRODUCED AND SHIPPED OUT OF THE MUNICIPALITY OF MALABANG AND IMPOSING PENALTIES FOR
VIOLATIONS THEREOF." The ordinance made it unlawful for any person, company or group of persons "to ship out of the Municipality
of Malabang, cassava starch or flour without paying to the Municipal Treasurer or his authorized representatives the corresponding fee
fixed by (the) ordinance."

Issue:
WON the amount collected under the ordinance in question partakes of the nature of a tax

Ruling:
Yes. The collection partakes the nature of tax although denominated as "police inspection fee" since its undeniable purpose is to raise
revenue. However, we cannot agree with the trial court's finding that the tax imposed by the ordinance is a percentage tax on sales
which is beyond the scope of the municipality's authority to levy under Section 2 of the Local Autonomy Act. Under the said provision,
municipalities and municipal districts are prohibited from imposing" any percentage tax on sales or other taxes in any form based thereon.
" The tax imposed under the ordinance in question is not a percentage tax on sales or any other form of tax based on sales. It is a fixed
tax of P.30 per bag of cassava starch or flour "shipped out" of the municipality. It is not based on sales.

Lutz VS Araneta, 98 Phil 48

Facts:
Walter Lutz in his capacity as the Judicial Administrator of the intestate of the deceased Antonio Jayme Ledesma, seeks to recover from
the Collector of the Internal Revenue the total sum of P14, 666.40 paid by the estate as taxes, under section 3 of Commonwealth Act
No. 567, also known as the Sugar Adjustment Act, for the crop years 1948-1949 and 1949-1950. Commonwealth Act. 567 Section 2
provides for an increase of the existing tax on the manufacture of sugar on a graduated basis, on each picul of sugar manufacturer;
while section 3 levies on the owners or persons in control of the land devoted to the cultivation of sugarcane and ceded to others for
consideration, on lease or otherwise.

9
Issue:
WON the tax imposition in the Commonwealth Act No. 567 is unconstitutional and not for public purpose.

Held:
NO. The Court held that the basic defect in the plaintiff's position is his assumption that the tax provided for in Commonwealth Act No.
567 is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6 (heretofore quoted in full), will show that the
tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In other
words, the act is primarily an exercise of the police power.

Greenfield VS Meer, 77 Phil 394

FACTS:
Since 1933, Greenfield was engaged in the business of embroidery in the City of Manila. In 1935, he began engaging buying and selling
mining stocks and securities for his own exclusive account and not for the account of others. In 1939, he filed his income tax return
showing that he made a net profit amounting to P52,449.29 on embroidery business and P17,850 on dividends from various corporations;
and that from the purchase and sales of mining stocks and securities he made a profit of P10,741.30 and incurred losses in the amount
of P78,049.10, thereby sustaining a net loss of P67,307.80.

ISSUES:
WON the loss from purchase and sale of mining stocks can be deducted for income tax purposes.

RULING:
NO. The losses sustained by Greenfield are capital losses from sales of capital assets since he is not considered as having been engaged
in the business of buying and selling securities within the meaning of section 30 (d) (1) (A) of Act No. 466 According to said opinion, in
order that he may so be considered, it is necessary that he must devote all his time or at least a major portion thereof to said business
and that the latter must be regularly carried on by him. In this case it is agreed that "since the year 1933 up to the present time, the
plaintiff has been continuously engaged in the embroidery business," and that "in 1935, the plaintiff began engaging in buying and selling
mining stocks and securities for his own exclusive account."

Basco VS PAGCOR, 196 SCRA 52

Facts:
Attorney Humberto Basco, Chairman of the Committee on Laws of the City Council of Manila, and others who are also taxpayers and
lawyers filed a petition seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR) Charter — PD 1869. They contend
that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees since the exemption clause in P.D.
1869 is violative of the principle of local autonomy. Section 13 par. (2) of P.D. 1869 exempts PAGCOR, as the franchise holder from
paying any "tax of any kind or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or
Local."

Issue:
WON the Section 13 par. (2) of P.D. 1869 exempting PAGCOR to taxes and fees is valid.

Held:
Yes. The Court held that Section 13 par. (2) of P.D. 1869 is valid. The power of local government to "impose taxes and fees" is always
subject to "limitations" which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or
revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local
governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

CIR VS Botelho Shipping Corp., 20 SCRA 487

Facts:
The Reparations Commission of the Philippines (Commission) — and Botelho Shipping Corporation (Botelho) — entered into a "Contract
of Conditional Purchase and Sale of Reparations Goods," whereby the former agreed to sell to Botelho for P6,798,888.88 the vessel "M/S
Maria Rosello," procured by the Commission from Japan, pursuant to the provisions of the Philippine-Japanese Reparations Agreement.
The Commission signed a similar contract with General Shipping Co., Inc. (General Shipping) for the sale thereto of "M/S General Lim"
at the price of P6,951,666.66.

Issue:
WON the tax exemption can be applied retroactively.

Ruling:
Yes. It seems clear that, under Republic Act No. 1789 — pursuant to which the contracts of Conditional Purchase and Sale in question
had been executed — the vessels "M/S Maria Rosello" and "M/S General Lim" were subject to compensating tax. Indeed, Section 14 of
said Act provides that "reparations goods obtained by private parties shall be exempt only from the payment of customs duties,
consular fees and the special import tax."

CIR VS CTA, GCL Retirement Plan, 207 SCRA 487

Facts:
GCL Retirement Plan (GCL, for brevity) is an employees' trust maintained by the employer, GCL Inc., to provide retirement, pension,
disability and death benefits to its employees. The Plan as submitted was approved and qualified as exempt from income tax by Petitioner
Commissioner of Internal Revenue in accordance with Rep. Act No. 4917. In 1984, Respondent GCL made investsments and earned
therefrom interest income from which was witheld the fifteen per centum (15%) final witholding tax imposed by Pres. Decree No. 1959
which took effect on 15 October 1984.

10
ISSUE:
WON GCL is exempted from the final withholding interest on interest income from money placements and purchase of treasury bills
required by PD 1529.

RULING:
YES. It appears that under Rep. Act No. 1983, which took effect on 22 June 1957, amending Sec. 56 (b) of the National Internal
Revenue Code (Tax Code, for brevity), employees' trusts were exempt from income tax. It is significant to note that the GCL Plan was
qualified as exempt from income tax by the Commissioner of Internal Revenue in accordance with Rep. Act No. 4917 approved on 17
June 1967. In so far as employees' trusts are concerned, the foregoing provision should be taken in relation to then Section 56(b) (now
53[b]) of the Tax Code, as amended by Rep. Act No. 1983, supra, which took effect on 22 June 1957. This provision specifically exempted
employee's trusts from income tax.

CIR VS Guerrero, 21 SCRA 180

FACTS:
The Commissioner of Internal Revenue denied the claim for refund in the sum of Php2,441.93 filed by the administrator of the estate of
Paul I. Gunn, a US Citizen, thereafter substituted by the present respondent A. D. Guerrero as special administrator. The deceased
operated an air transportation business under the business name and style of Philippine Aviation Development; his estate, as it was
claimed, "was entitled to the same rights and privileges as Filipino citizens operating public utilities including privileges in the matter of
taxation.

ISSUE:
WON Section 142 of the National Internal Revenue Code, allowing Filipinos a refund of 50% of the specific tax paid on aviation oil, be
availed by herein respondent.

HELD:
No. The decision of the Court of Tax Appeals is reversed. The Court held that to the extent a refund is allowable, there is in reality a tax
exemption. The rule is for tax exemption to exist, it must categorically declared in words that admit of no doubt. No such
language was found in the Ordinance. It furnishes no support, whether express or implied, to the claim of respondent Administrator for
a refund.

PLDT VS Davao City, GR No. 143867, 22 August 2001

Facts:
PLDT applied for a Mayor's Permit to operate its Davao Metro Exchange. However, Davao City withheld action on the application pending
payment by PLDT of the local franchise tax in the amount of P3,681,985.72 for the 1st to 4th quarter of 1999. PLDT protested the
assessment of the local franchise tax and requested a refund of the franchise tax paid by it for the year 1997 and the first to the third
quarters of 1998. PLDT contended that it was exempt from the payment of franchise tax based on Sec. 23 of RA 7925 which provides
the equality of treatment in the Telecommunications Industry that “any advantage, favor, privilege, exemption, or immunity granted
under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications
franchise and shall be accorded immediately and unconditionally to the grantees of such franchises.

Issues:
WON the withdrawal of exemption under Sec. 137 of LGC also covers future exemptions.

Rulings:
No. In Philippine Airlines, Inc. v. Edu, where a provision of the Tax Code enacted on (RA 5431) withdrew the exemption enjoyed by PAL,
it was held that a subsequent amendment of PAL's franchise, exempting it from all other taxes except that imposed by its franchise,
again entitled PAL to exemption from the date of the enactment of such amendment. The Tax Code provision withdrawing the tax
exemption was not construed as prohibiting future grants of exemptions from all taxes. Indeed, the grant of taxing powers
to local government units under the Constitution and the LGC does not affect the power of Congress to grant exemptions to certain
persons, pursuant to a declared national policy.

Nestle Philippines VS CA, GR No. 134114

FACTS:
Nestle Philippines, Inc., was assessed with customs duties and advance sales taxes by the Collector of Customs of Manila for each of
their separate importations on the basis of the published Home Consumption Value (HCV) indicated in the Bureau of Customs Revision
Orders. Nestle paid the same but seasonably filed the corresponding protests before the said Collector of Customs from October 25 to
December 5, 1984, uniformly alleging therein that the latter erroneously applied higher home consumption values in determining the
dutiable value for each of these separate importations. In the said protests, petitioner claims for refund of both the alleged overpaid
import duties.

ISSUE:
WON, in all claims for refund of customs duties, the Collector to whom such customs duties are paid and upon receipt of such claim is
mandated to verify the same by the records of his Office.

HELD:
1. YES. It is clear from the foregoing provision of the Tariff and Customs Code that in all claims for refund of customs
duties, the Collector to whom such customs duties are paid and upon receipt of such claim is mandated to verify the same by the records
of his Office. If such claim is found correct and in accordance with law, the Collector shall certify the same to the Commissioner with his
recommendation together with all, the necessary papers and documents.

Coconut Oil Refiners VS Torres, GR No. 132527

FACTS:
RA No. 7227 was enacted on March 13, 1992, , providing for, among other things, the sound and balanced conversion of the Clark and
Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote
11
the economic and social development of Central Luzon in particular and the country in general. Among the salient provisions are as
follows: ìSECTION 12. x x x The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring
free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives
such as tax and duty-free importations of raw materials, capital and equipment.

ISSUES:
WON Executive Order No. 97-A, Section 5 OF Executive order NO. 80, and Section 4 OF BCDA Board Resolution NO. 93-05-034 are null
and void for being an exercise of executive lawmaking.

HELD:
On the issue of executive legislation, petitioners contend that the wording of RA No. 7227 clearly limits the grant of tax incentives to the
importation of raw materials, capital and equipment only. Hence, they claim that the assailed issuances constitute executive legislation
for invalidly granting tax incentives in the importation of consumer goods such as those being sold in the duty-free shops, in violation of
the letter and intent of RA No. 7227. The Court held that Section 12 of RA No. 7227 clearly does not restrict the duty-free importation
only to 'raw materials, capital and equipment.

Maceda VS Macaraig, GR No. 88291, 31 May 1991

Facts:
In 1936, CA No. 120 created the (National Power Corporation) NPC as a public corporation to undertake the development of hydraulic
power and the production of power from other sources. In 1949, RA 358 granted NPC tax and duty exemption privileges under Sec. 2
which provides “To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties, fees,
imposts, charges and restrictions of the Republic of the Philippines, its provinces, cities and municipalities.”

Issue:
WON NPC has ceased to enjoy indirect tax and duty exemption with the enactment of P.D. No. 938 on May 27, 1976 which amended
P.D. No. 380, issued on January 11, 1974.

Ruling:
No. The contention of petitioner that the exemption of NPC from indirect taxes under Section 13 of R.A. No. 6395 and P.D. No. 380, is
deemed repealed by P.D. No. 938 when the reference to it was deleted is not well-taken. Repeal by implication is not favored unless it
is manifest that the legislature so intended. It is evident from the provision of P.D. No. 938 that its purpose is to maintain the tax
exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A. No. 6895 and P.D. No. 380 if it is to attain
its goals.

Maceda VS Macaraig, 223 SCRA 217

Facts:
This matter of indirect tax exemption of NPC is brought again in the SC for the second time, as a motion for reconsideration. CA No. 120
was enacted creating the National Power Corporation, a public corporation, mainly to develop hydraulic power from all water sources in
the Philippines. A new section was added to the charter, now known as Sec. 13, RA 6395, which declares the non-profit character and
tax exemptions of NPC. In 1976, PD 882 was issued withdrawing the tax exemption of NPC with regard to imports.

Issue:
WON NPC is exempted from both direct and indirect taxes.

Rulings:
Yes. It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and indirect taxes under P.D.
No. 938. Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault were.

Madrigal v. Rafferty, 38 Phil 414

Facts:
Vicente Madrigal and Susana Paterno were legally married prior to January 1, 1914. The marriage was contracted under the provisions
of law concerning conjugal partnerships. On February 25, 1915, Vicente Madrigal filed sworn declaration on the prescribed form with the
CIR, showing, as his total net income for the year 1914, the sum of P296,302.73. Subsequently Madrigal submitted the claim that the
said P296,302.73 did not represent his income for the year 1914, but was in fact the income of the conjugal partnership existing between
himself and his wife Susana Paterno. Hence, the income declared by Vicente Madrigal should be divided into two equal parts, one-half
to be considered the income of Vicente Madrigal and the other half of Susana Paterno.

Issue:
WON the net income forms part of the conjugal properties.

Held:
No. Petitioners contend that the taxable income should be divided into two equal parts, because of the conjugal partnership existing
between them. The learned argument of counsel is mostly based upon the provisions of the Civil Code establishing the conjugal
partnership. The counter contentions of appellees are that the taxes imposed by the Income Tax Law are as the name implies taxes upon
income tax and not upon capital and property; that the fact that Madrigal was a married man, and his marriage contracted under the
provisions governing the conjugal partnership, has no bearing on income considered as income, and that the distinction must be drawn
between the ordinary form of commercial partnership and the conjugal partnership of spouses resulting from the relation of marriage.

Eisner v. Macomber, 252 US 89

FACTS:
Mrs. Macomber owned 2,200 share of Standard Oil Company of California stock. . In January, 1916, the company declared a stock
dividend and Mrs. Macomber received an additional 1,100 shares, of which 18.07 per cent., or 198.77 shares, par value $19,877, were
treated as representing surplus earned between March 1, 1913, and January 1, 1916. The IRS treated the $19,877 as taxable income
under the Revenue Act of 1916 which provided that a stock dividend was considered income to the amount of its cash value. She was
called to pay the tax which she did pay under protest.
12
ISSUE:
WON the stock dividend is taxable.

RULING:
NO. The Supreme Court affirmed the District Court holding for the taxpayer that a stock dividend is not income. The Revenue Act of 1916
provision subjecting stock dividends to tax was held unconstitutional. A stock dividend reflects the corporation transferring an amount
from "surplus" (retained earnings) to "capital stock." Such a transaction is merely a bookkeeping entry and "affects only the form, not
the essence, of the "liability" acknowledged by the corporation to its own shareholders.

Raytheon Productions v. CIR, 144 F2d 110

Facts:
Raytheon Production Corporation exists as a tax- free reorganization. The original Raytheon Company was a pioneer manufacturer of a
rectifying tube which made possible the operation of a radio receiving set on alternating current instead of on batteries. The Radio
Corporation of America had many patents covering radio circuits and claimed control over almost all of the practical circuits. Cross-
licensing agreements had been made among several companies including RCA. Then, RCA had developed a competitive tube which
produced the same type of rectification as the Raytheon tube.

Issue:
WON the amount received by Raytheon in the compromise settlement of a suit for damages under the Federal Anti-Trust Laws, 15
U.S.C.A. Sec. 1 et seq., is an income.

Ruling:
No. It is a non- taxable return of capital. Damages recovered in an antitrust action are not necessarily nontaxable as a return of capital.
As in other types of tort damage suits, recoveries which represent a reimbursement for lost profits are income. The reasoning is that
since the profits would be taxable income, the proceeds of litigation which are their substitute are taxable in like manner. Damages for
violation of the anti-trust acts are treated as ordinary income where they represent compensation for loss of profits.

CIR v. Javier, 199 SCRA 824

Facts:
Victoria L. Javier, the wife of respondent Melchor Javier, received from the Prudential Bank and Trust Company the amount of
US$999,973.70 remitted by her sister, Mrs. Dolores Ventosa, through some banks in the United States, among which is Mellon Bank,
N.A.. Mellon Bank, N.A. filed a complaint against Melchor Javier, his wife and other defendants, claiming that its remittance of
US$1,000,000.00 was a clerical error and should have been US$1,000.00 only, and praying that the excess amount of US$999,000.00
be returned on the ground that the defendants are trustees of an implied trust for the benefit of Mellon Bank with the clear, immediate,
and continuing duty to return the said amount from the moment it was received.

Issue:
WON Melchor Javier is liable for the 50% Fraud Penalty.

Ruling:
No. CIR contends: that Melchor Javier committed fraud by not declaring the "mistaken remittance" in his income tax return and by merely
making a footnote thereon which read: "Taxpayer was the recipient of some money from abroad which he presumed to be a gift but
turned out to be an error and is now subject of litigation." Said return was not fraudulent. The footnote was practically an invitation to
the petitioner to make an investigation, and to make the proper assessment. The rule in fraud cases is that the proof "must be clear and
convincing", that is, it must be stronger than the "mere preponderance of evidence" which would be sufficient to sustain a judgment on
the issue of correctness of the deficiency itself apart from the fraud penalty.

Sison v. Ancheta, GR L-59431, July 25, 1994

FACTS:
Sison, as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the imposition of higher rates of tax upon
his income arising from the exercise of his profession vis-à-vis those which are imposed upon fixed income or salaried individual taxpayers.
He characterizes Section 21 of the NIRC Code of 1977 as arbitrary amounting to class legislation, oppressive and capricious in character.

ISSUE:
WON a bare allegation that Batas 135, which sets different income tax schedules for fixed income earners and business or professional
income earners, is arbitrary does not suffice to invalidate said tax statute.

HELD:
Yes. A mere allegation, as here, does not suffice. There must be a factual foundation of such unconstitutional taint. Considering that
Sison here would condemn such a provision as void on its face, he has not made out a case. This is merely to adhere to the authoritative
doctrine that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad
standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a showing, the
presumption of validity must prevail.

Evangelista v. Collector, 102 Phil 140

Facts:
The petitioners borrowed from their father the sum of P591, 400.00 which amount together with their personal monies was used by them
for the purpose of buying real properties. On February 2, 1943, they bought from Mrs. Josefina Florentino a lot with an area of 3,713.40
sq. m. including improvements thereon from the sum of P100,000.00; this property has an assessed value of P57,517.00 as of 1948.

Issue:
WON EVANGELISTAS should not be considered as a corporation and be taxed thereafter.

13
Held:
NO. They are considered as a corporation within the meaning of the Internal Revenue Code and should be taxed accordingly. To begin
with, the tax in question is one imposed upon "corporations", which, strictly speaking, are distinct and different from "partnerships".
When our Internal Revenue Code includes "partnerships" among the entities subject to the tax on "corporations", said Code must allude,
therefore, to organizations which are not necessarily "partnerships", in the technical sense of the term. Thus, for instance, section 24 of
said Code exempts from the aforementioned tax "duly registered general partnerships which constitute precisely one of the most typical
forms of partnerships in this jurisdiction.

Tan v. CIR, GR L-109289, Oct. 3, 1994

FACTS:
These two consolidated special civil actions challenge the constitutionality of RA 7496, or the Simplified Net Income Taxation Scheme,
amending certain provisions of the NIRC. Petitioner further contends that the questioned bill is not applicable to business corporations
or to partnership but only with respect to individuals and professionals.

ISSUE:
WON the contentions posed by petitioners in the consolidated case are tenable.

HELD:
No. In G.R No 109289, the Court said that Uniformity of taxation, like the kindred concept of equal protection, merely requires that all
subjects or objects of taxation, similarly situated, are to be treated alike both in privileges and liabilities. What may instead be perceived
to be apparent from the amendatory law is the legislative intent to increasingly shift the income tax system towards the schedular
approach in the income taxation of individual taxpayers and to maintain, by and large, the present global treatment on taxable
corporations.

Pascual v. CIR, 166 SCRA 560

FACTS:
On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and on May 28, 1966, they bought another
three (3) parcels of land from Juan Roque. The first two parcels of land were sold by petitioners in 1968 toMarenir Development
Corporation, while the three parcels of land were sold by petitioners to Erlinda Reyes and Maria Samson on March 19,1970. Petitioners
realized a net profit in the sale made in 1968 in the amount of P165,224.70, while they realized a net profit of P60,000.00 in the sale
made in 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.

ISSUE:
WON PASCUAL AND DRAGON CREATED AN UNREGISTERED PARTNERSHIP HENCE IT MUST BE CONSIDERED AS LIABLE FOR
CORPORATE INCOME TAX?

RULING:
NO. The court ruled that the petitioners have not created an unregistered partnership because it is clear that there is co-ownership
between the two.(Basis : Art. 1767, Civil Code). In resolving the issue, SC held as follows that the issue in this case is whether petitioners
are subject to the tax on corporations provided for in section 24 of Commonwealth Act No. 466, otherwise known as the National Internal
Revenue Code, as well as to the residence tax for corporations and the real estate dealers' fixed tax.

Afisco v. CIR, 302 SCRA 1

Facts:
Afisco Insurance Corporation (Afisco) and 40 other non-life insurance corporations entered into a Quota Share Reinsurance Treaty and a
Surplus Reinsurance Treaty on August 1, 1965 with Munchener Ruckversicherungs-Gesselschaft (Munich), a non-resident foreign
insurance corporation, upon issuance by the former of Erection, Machinery Breakdown, Boiler Explosion and Contractors All Risk insurance
policies. A pool agreement composed of Afisco, et al. was formed on the same day because reinsurance treaties required them to do
such.

Issue:
WON the pool created by Afisco, et al. is considered as a partnership taxable as a corporation.

Held:
Yes. The Court held that the pool created by Afisco, et al. is considered a partnership taxable as a corporation. Article 1767 of the Civil
Code recognizes the creation of a contract of partnership when “two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves.” Its requisites are: “(1) mutual contribution to
a common stock, and (2) a joint interest in the profits.” In other words, a partnership is formed when persons contract “to devote to a
common purpose either money, property, or labor with the intention of dividing the profits between themselves.” Meanwhile, an
association implies associates who enter into a “joint enterprise x x x for the transaction of business.”

Solidbank v. CIR, CTA Case No. 4868, June 19, 1997

Facts:
Originally, this case was instituted by Solidbank Corporation (SBC) and Susana Realty, Inc. (SRI) through a petition to review the letter-
decision of the CIR denying their letter- protest against the following tax deficiencies: (1) P15,316,258.23 as deficiency income tax against
unregistered partnership of SBC and SRI; (2) P6,383,776.99 as definciency donor’s tax against SRI; (3) P732,358.51 as deficiency
withholding tax against SRI; and (4) P732,358.51 as deficiency withholding tax against SBC. However, pursuant to RMO No. 45-93 and
54- 93, SBC opted and paid the compromise amount at P2,867,704.76. The case insofar as SBC is concerned was withdrawn and deemed
closed and terminated by virtue of the compromise settlement. On the other hand, SRI decided to forego the compromise and instead
pursued an appeal.

14
Issue:
WON SBC and SRI by virtue of the Deed have thereby formed an unregistered partnership which is subject to corporate income tax
prescribed under Sec. 24 (a) and (b) of the NIRC.

Ruling:
No. SBC and SRI had entered into a co- ownership and not unregistered partnership. The agreement for administration of property is
but a mere incident of the co- ownership and not an act reflective of their intention to engage in a mutual fund for profit or business.
Art. 1767 of the Civil Code [By the contract of partnership, two or more persons bind themselves to contribute money, property, or
industry to a common fund, with the intention of dividing the profits among themselves] prescribes two essential elements of a partnership
namely: (a) an agreement to contribute money, property, or industry to a common fund; and (b) intent to divide the profits among the
contracting parties.

Marubeni VS CIR, 177 SCRA 500

Facts:
Marubeni Corporation, represents itself as a foreign corporation duly organized and existing under the laws of Japan and duly licensed
to engage in business under Philippine laws with branch office in Manila. It has equity investments in AG&P of Manila. AG&P declared
and paid cash dividends to Marubeni and withheld the corresponding 10% final dividend tax thereon. AG&P directly remitted the cash
dividends to Marubeni’s head office in Tokyo, Japan, net not only of the 10% final dividend tax, but also of the withheld 15% profit
remittance tax based on the remittable amount after deducting the final withholding tax of 10%.

Issue:
WON Marubeni Corporation is a non-resident foreign corporation under Philippine laws.

Ruling:
Yes. The general rule that a foreign corporation is the same juridical entity as its branch office in the Philippines cannot apply here. This
rule is based on the premise that the business of the foreign corporation is conducted through its branch office, following the principal
agent relationship theory. It is understood that the branch becomes its agent here. So that when the foreign corporation transacts
business in the Philippines independently of its branch, the principal-agent relationship is set aside. The transaction becomes one of the
foreign corporation, not of the branch. Consequently, the taxpayer is the foreign corporation, not the branch or the resident foreign
corporation. Corollarily, if the business transaction is conducted through the branch office, the latter becomes the taxpayer, and not the
foreign corporation.

CIR VS Visayas Electric, 23 SCRA 715

Facts:
Visayan Electric Company (VEC) is the holder of a legislative franchise, Act 3499 of the Philippine Legislature, to operate and maintain
an electric light, heat, and power system in the City of Cebu. It established a pension fund, known as the "Employees' Reserve for
Pensions." Said fund is for the benefit of its "present and future" employees, in the event of retirement, accident or disability. Every
month thereafter an amount has been set aside for this purpose. It is taken from the gross operating receipts of the company. This
reserve fund was later invested by the company in stocks of San Miguel Brewery, Inc., for which dividends have been regularly received.
But these dividends were not declared for tax purposes.

Issue:
WON Visayan Electric Company is liable for deficiency income tax on dividends from the stock investment of its employees' reserve fund
for pensions?

Ruling:
Yes. VEC in its capacity as fiduciary of its employees' reserve fund is liable for the payment of individual income tax set forth in Section
56(a) in connection with Section 21 of the National Internal Revenue Code. The Employees’ Reserve Fund, a separate taxable entity, is
liable for deficiency tax. The disputed income are not receipts, revenues or profits of the company.

CIR VS CA, 207 SCRA 487

Facts:
GCL Retirement Plan is an employees' trust maintained by the employer, GCL Inc., to provide retirement, pension, disability and death
benefits to its employees. The Plan as submitted was approved and qualified as exempt from income tax by CIR in accordance with Rep.
Act No. 4917. GCL made investments and earned therefrom interest income from which was witheld the fifteen per centum (15%) final
withholding tax imposed by Pres. Decree No. 1959. GCL filed with CTA a claim for refund withheld by Anscor Capital and Investment
Corp. and by Commercial Bank of Manila, stating that it disagreed with the collection of the 15% final withholding tax from the interest
income as it is an entity fully exempt from income tax as provided under Rep. Act No. 4917 in relation to Section 56 (b) 3 of the Tax
Code.

Issue:
WON the GCL Plan is exempt from the final withholding tax on interest income from money placements and purchase of treasury bills
required by PD 1959.

Ruling:
Yes. It is significant to note that the GCL Plan was qualified as exempt from income tax by the CIR in accordance with RA 4917. In so far
as employees' trusts are concerned, the foregoing provision should be taken in relation to then Section 56(b) (now 53[b]) of the Tax
Code, as amended by Rep. Act No. 1983. It is evident that tax-exemption is likewise to be enjoyed by the income of the pension trust.
Otherwise, taxation of those earnings would result in a diminution accumulated income and reduce whatever the trust beneficiaries would
receive out of the trust fund. This would run afoul of the very intendment of the law.

CIR VS CA, GR No. 124043, Oct. 14, 1998

Facts:
Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the
public, especially the young people, pursuant to its religious, educational and charitable objectives. YMCA earned income from leasing
15
out a portion of its premises to small shop owners, like restaurants and canteen operators, and from parking fees collected from non-
members. Petitioner issued an assessment to private respondent for deficiency taxes. Private respondent formally protested the
assessment. In reply, the CIR denied the claims of YMCA.

Issue:
WON he income derived from rentals of real property owned by YMCA subject to income tax

Held:
Yes. Income of whatever kind and character of non-stock non-profit organizations from any of their properties, real or personal, or from
any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under
the NIRC.

CIR VS CA, GR No. 115349, April 18, 1997

Facts:
Private respondent, Ateneo de Manila University, is a non-stock, non-profit educational institution with auxiliary units and branches all
over the country. The Institute of Philippine Culture (IPC) is an auxiliary unit with no legal personality separate and distinct from private
respondent. The IPC is a Philippine unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts
sponsorships for its research activities from international organizations, private foundations and government agencies.

Issue:
WON private respondent falls under the purview of independent contractor pursuant to Section 205 of the Tax Code and is subject to a
3% contractors tax.

Held:
No. The petition is not meritorious.

The term "independent contractors" include persons (juridical or natural) not enumerated above (but not including individuals subject to
the occupation tax under Section 12 of the Local Tax Code) whose activity consists essentially of the sale of all kinds of services for a fee
regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such
contractors or their employees.

Gutierrez VS Collector, 101 Phil 713

Facts:
Maria Morales, married to Blas Gutierrez, was the registered owner of an agricultural land in Mabalacat, Pampanga. The Republic of the
Philippines subject the lot to expropriation proceedings to expand Clark Field Air Base upon the request of the U.S. Government and
pursuant to the terms of the Military Bases Agreement.

Issue:
WON income from expropriation should be deemed as income from sale, any profit derived therefrom is subject to income tax as
capital gain.

Held:
Yes. The Court held that income from expropriation should be deemed as income from sale, any profit derived therefrom is subject to
income tax as capital gain. US jurisprudence has held that The transfer of property through condemnation proceedings is a sale or
exchange within the meaning of section 117 (a) of the 1936 Revenue Act and profit from the transaction constitutes capital gain".

Eisner VS Macomber, 252 US 189

Facts:
Standard Oil Company is a corporation of California. It had surplus and undivided profits invested in plant, property, and business and
required for the purposes of the corporation, amounting to about $45,000,000, of which about $20,000,000 had been earned prior to
March 1, 1913. In order to readjust the capitalization, it issued a 50% stock dividend and transferred from surplus account to capital
stock account an amount equivalent to such issue. Macomber, being the owner of 2,200 shares of the old stock, received certificates for
1,100 additional shares. of which 18.07 per cent., or 198.77 shares, par value $19,877, were treated as representing surplus earned
between March 1, 1913, and January 1, 1916.

Issue:
WON a stock dividend is an income.

Ruling:
No. In Towne v. Eisner, the question was whether a stock dividend made in 1914 against surplus earned prior to January 1, 1913, was
taxable against the stockholder under the Act of October 3, 1913 (38 Stat. 114, 166, c. 16 ), which provided (section B, p. 167) that net
income should include 'dividends,' and also 'gains or profits and income derived from any source whatever.

CIR VS Javier, 199 SCRA 824

FACTS:
Sometime in 1977, Victoria Javier, wife of Melchor Javier, received from Prudential Bank and Trust Co., US $999, 973.70, remitted by her
sister Dolores Ventosa, through some bank in the United States, among them is Mellon Bank NA. To compensate for the loss, Mellon
Bank filed Bank filed suit to recover the excess amount of US $999,000 as the remittance of US$ 1 million was a clerical error and should
have been US $1,000 only.

ISSUE:
WON the mistaken remittance be included in Javier’s gross income, and therefore be subject to tax.

16
HELD:
No. The remittance was not a taxable gain, since it is still under litigation and there is a chance that Javier might be obligated to return
it. It will only become taxable once the case has been settled because by then, whatever amount that will be rewarded Javier has a claim
of right over it.

NDC VS CIR, 151 SCRA 472

Facts:
The National Development Company (NDC), a duly organized corporation located in Calle Pureza, Sta. Mesa, Manila, Philippines, entered
into contracts in Tokyo with several Japanese shipbuilding companies for the construction of twelve 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
letters of credit with an interest of five per cent (5%) per annum on the principal. The NDC remitted to the shipbuilders in Tokyo the
total amount of US$4,066,580.70 as interest on the balance of the purchase price without withholding any tax.

Issue:
WON the NDC is not obliged to withhold tax on interests it paid to Japanese shipbuilders on the reason that all the related activities
were done in Tokyo.

Held:
No. The Court held that the NDC is obliged to withhold tax on interests it paid to Japanese shipbuilders on the reason that all the
related activities were done in Tokyo. The law does not speak of activity but of "source," which in this case is the NDC. This is a
domestic and resident corporation with principal offices in Manila.

CIR VS CTA, 127 SCRA 9

FACTS:
This case is about the refund of a 1971 income tax amounting to P324,255. Smith Kline and French Overseas Company, a multinational
firm domiciled in Philadelphia, Pennsylvania, is licensed to do business in the Philippines. It is engaged in the importation, manufacture
and sale of pharmaceuticals drugs and chemicals. 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.

ISSUE:
WON Smith Kline’s share of the head office overhead expenses incurred outside the Philippines deductible?

RULING:
YES. The Supreme Court ruled that Smith Kline’s share of the head officer overhead expenses incurred outside the Philippines is
deductible. 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.

CIR VS Marubeni, GR No. 137377, Dec. 18, 2001

FACTS:
Respondent Marubeni Corporation is a foreign corporation organized and existing under the laws of Japan. It is engaged in general import
and export trading, financing and the construction business. It is duly registered to engage in such business in the Philippines and
maintains a branch office in Manila. In November 1985, petitioner Commissioner of Internal Revenue issued a letter of authority to
examine the books of accounts of the Manila branch office of respondent corporation for the fiscal year ending March 1985. In its
examination, CIR found that MARUBENI have undeclared income from two (2) contracts in the Philippines, both of which were completed
in 1984.

ISSUES:
WON MARUBENI is may avail of the tax amnesty under EO 41.

RULING:
YES. Section 4 of E.O. No. 41 enumerates which taxpayers cannot avail of the amnesty granted thereunder, viz: b) Those with income
tax cases already filed in Court as of the effectivity hereof. Section 4 (b) of E.O. No. 41 is very clear and unambiguous. It excepts
from income tax amnesty those taxpayers with income tax cases already filed in court as of the effectivity hereof. The point of reference
is the date of effectivity of E.O. No. 41. The filing of income tax cases in court must have been made before and as of the date of
effectivity of E.O. No. 41.

Phil. Guaranty VS CIR, GR L-22074, Apr. 30, 1965

Facts:
The Philippine Guaranty Co., Inc., (Philippine Guaranty) a domestic insurance company, entered into reinsurance contracts, with foreign
insurance companies not doing business in the Philippines. Philippine Guaranty agreed to cede to the foreign reinsurers a portion of the
premiums on insurance it has originally underwritten in the Philippines, in consideration for the assumption by the foreign reinsurers of
liability on an equivalent portion of the risks insured. Said reinsurance contracts were signed by Philippine Guaranty in Manila and by the
foreign reinsurers outside the Philippines.

Issue:
WON reinsurance premium ceded to foreign insurers not doing business in the Philippines are subject to tax.

Ruling:
YES. The reinsurance contracts, show that the transactions or activities that constituted the undertaking to reinsure Philippine Guaranty
against loses arising from the original insurances in the Philippines were performed in the Philippines. The liability of the foreign reinsurers
commenced simultaneously with the liability of Philippine Guaranty under the original insurances. Philippine Guaranty kept in Manila a
17
register of the risks ceded to the foreign reinsurers. Entries made in such register bound the foreign resinsurers, localizing in the
Philippines the actual cession of the risks and premiums and assumption of the reinsurance undertaking by the foreign reinsurers.

Henderson VS Collector, 1 SCRA 649; Convenience of the Employer Rule

Facts:
The spouses Artuhur Henderson and Marie B. Henderson filed with the BIR returns of annual net income for the years 1948 to 1952. The
BIR issued a tax assessment which considered as part of their taxable income thetaxpayer-husband's allowances for rental, residential
expenses,subsistence, water, electricity and telephone; bonuspaid to him; withholding tax and entrance fee to the Marikinagun and
Country Bluc paid by his employer for hisaccount; and travelling allowance of his wife.

Issue:
WON the allowances for rental of the apartment furnished by the husband-taxpayer's employer-corporation, including utilities such as
light, water, telephone, etc. and the allowance for travel expenses given by his employer-corporation to his wife in 1952 part of taxable
income?

Ruling:
No. Section 29, Commonwealth Act No. 466, National Internal Revenue Code, provides: "Gross income" includes gains, profits, and
income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from
professions, vocations, trades, businesses, commerce, sales, or dealings in property, whether real or personal, growing out of the
ownership or use of or interest in such property; also from interest, rents dividend, securities, or the transaction of any business carried
on for gain or profit, or gains, profits, and income derived from any source whatever.

CIR VS Castañeda, 203 SCRA 72

Facts:
Efren P. Castaneda retired from the government service as Revenue Attache in the Philippine Embassy in London. Upon retirement, he
received, among other benefits, terminal leave pay from which CIR withheld P12,557.13 allegedly representing income tax thereon.
Castañeda filed a refund thereof contending that the cash equivalent of his terminal leave is exempt from income tax. CTA ordered CIR
to refund Castañeda.

Issue:
WON terminal leave pay received by a government official or employee on the occasion of his compulsory retirement from the government
service is subject to withholding (income) tax.

Ruling:
No. In the recent case of Jesus N. Borromeo vs. The Hon. Civil Service Commission, et al., G.R. No. 96032, 31 July 1991, the Court
explained the rationale behind the employee's entitlement to an exemption from withholding (income) tax on his terminal leave pay as
follows: . . . commutation of leave credits, more commonly known as terminal leave, is applied for by an officer or employee who retires,
resigns or is separated from the service through no fault of his own.

Reagan VS CIR

FACTS:
Reagan, a citizen of the United States and an employee of Bendix Radio, Division of Bendix Aviation Corporation, which provides technical
assistance to the United States Air Force, was assigned at Clark Air Base, Philippines, on or about July 7, 1959. Nine (9) months thereafter
and before his tour of duty expired, Reagan imported on April 22, 1960 a tax-free 1960 Cadillac car with accessories valued at $6,443.83,
including freight, insurance and other charges."

ISSUE:
WON Reagan’s contention that since the transaction, having taken place at the Clark Field Air Base at Pampanga, is in legal contemplation
that the sale was made outside Philippine territory and therefore beyond our jurisdictional power to tax.

HELD:
NO. Nothing is better settled than that the Philippines being independent and sovereign, its authority may be exercised over its entire
domain. There is no portion thereof that is beyond its power. Within its limits, its decrees are supreme, its commands paramount. Its
laws govern therein, and everyone to whom it applies must submit to its terms. That is the extent of its jurisdiction, both territorial and
personal. Necessarily, likewise, it has to be exclusive. If it were not thus, there is a diminution of its sovereignty.

CIR VS CA, 203 SCRA 72

FACTS:
GCL Retirement Plan (GCL, for brevity) is an employees' trust maintained by the employer, GCL Inc., to provide retirement, pension,
disability and death benefits to its employees. The Plan as submitted was approved and qualified as exempt from income tax by Petitioner
Commissioner of Internal Revenue in accordance with Rep. Act No. 4917. In 1984, Respondent GCL made investments and earned
therefrom interest income from which was witheld the fifteen per centum (15%) final witholding tax imposed by Pres. Decree No.
1959,2 which took effect on 15 October 1984.

ISSUE:
WON the GCL Plan is exempt from the final withholding tax on interest income from money placements and purchase of treasury bills
required by Pres. Decree No. 1959.

HELD:
YES. To begin with, it is significant to note that the GCL Plan was qualified as exempt from income tax by the Commissioner of Internal
Revenue in accordance with Rep. Act No. 4917 approved on 17 June 1967. This law specifically provided: Sec. 1. Any provision of law to
the contrary notwithstanding, the retirement benefits received by officials and employees of private firms, whether individual or corporate,
18
in accordance with a reasonable private benefit plan maintained by the employer shall be exempt from all taxes and shall not be liable
to attachment, levy or seizure by or under any legal or equitable process whatsoever except to pay a debt of the official or employee
concerned to the private benefit plan or that arising from liability imposed in a criminal action.

CIR VS GCI Retirement, 207 SCRA 487

Facts:
GCL Retirement Plan is an employees' trust maintained by the employer, GCL Inc., to provide retirement, pension, disability and death
benefits to its employees. The Plan as submitted was approved and qualified as exempt from income tax by Petitioner Commissioner of
Internal Revenue in accordance with Rep. Act No. 4917. In 1984, Respondent GCL made investsments and earned therefrom interest
income from which was witheld the fifteen per centum (15%) final witholding tax imposed by Pres. Decree No. 1959,2 which took effect
on 15 October 1984 GCL filed with Petitioner a claim for refund in the amounts of P1,312.66 withheld by Anscor Capital and Investment
Corp., and P2,064.15 by Commercial Bank of Manila.

Issue:
WON GCL is exempted from Income Tax?

Held:
GCL Plan was qualified as exempt from income tax by the Commissioner of Internal Revenue in accordance with Rep. Act No. 4917
approved on 17 June 1967. In so far as employees' trusts are concerned, the foregoing provision should be taken in relation to then
Section 56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No. 1983, supra, which took effect on 22 June 1957. The tax-
exemption privilege of employees' trusts, as distinguished from any other kind of property held in trust, springs from the foregoing
provision. It is unambiguous. Manifest therefrom is that the tax law has singled out employees' trusts for tax exemption.

NDC VS CIR, GR L- 53961, June 30, 1987

Facts:
The National Development Company (NDC) entered into contracts in Tokyo with several Japanese shipbuilding companies for the
construction of twelve ocean-going vessels. 1 The purchase price was to come from the proceeds of bonds issued by the Central
Bank. 2 Initial payments were made in cash and through irrevocable letters of credit. 3Fourteen promissory notes were signed for the
balance by the NDC and, as required by the shipbuilders, guaranteed by the Republic of the Philippines. 4 Pursuant thereto, the remaining
payments and the interests thereon were remitted in due time by the NDC to Tokyo. The vessels were eventually completed and delivered
to the NDC in Tokyo.

Ruling:
Yes. The law, however, does not speak of activity but of "source," which in this case is the NDC. This is a domestic and resident
corporation with principal offices in Manila. There is no basis for saying that the interest payments were obligations of the Republic of
the Philippines and that the promissory notes of the NDC were government securities exempt from taxation under Section 29(b)[4] of
the Tax Code. It is also incorrect to suggest that the Republic of the Philippines could not collect taxes on the interest remitted because
of the undertaking signed by the Secretary of Finance.

NDC vs CIR, GR L-53961, June 30, 1987

Facts:
The National Development Company entered into contracts in Tokyo with several Japanese shipbuilding companies for the construction
of twelve 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 letters of credit. Fourteen promissory notes were signed for the balance by the NDC and, as
required by the shipbuilders, guaranteed by the Republic of the Philippines. Pursuant thereto, the remaining payments and the interests
thereon were remitted in due time by the NDC to Tokyo. The vessels were eventually completed and delivered to the NDC in Tokyo.

Issue:
WON the Japanese shipbuilders are liable to tax on the interest remitted to them, derived from sources within the Philippines.

Ruling:
YES. As the Tax Court put it: It is quite apparent, under the terms of the law, that the Government's right to levy and collect income tax
on interest received by foreign corporations not engaged in trade or business within the Philippines is not planted upon the condition
that 'the activity or labor — and the sale from which the (interest) income flowed had its situs' in the Philippines. The law specifies:
'Interest derived from sources within the Philippines, and interest on bonds, notes, or other interest-bearing obligations of residents,
corporate or otherwise.' Nothing there speaks of the 'act or activity' of non-resident corporations in the Philippines, or place where the
contract is signed.

CIR vs SC Johnson, GR 127105, June 25, 1999

FACTS:
S.C. JOHNSON AND SON, INC, a domestic corporation organized and operating under the Philippine laws, entered into a license
agreement with SC Johnson and Son, United States of America (USA), a non-resident foreign corporation based in the U.S.A. By virtue
of which, SC Johnson was granted the right to use the trademark, patents and technology owned by the latter including the right to
manufacture, package and distribute the products covered by the Agreement and secure assistance in management, marketing and
production from SC Johnson and Son, U. S. A.

ISSUE:
WON the royalties paid by SC Johnson Inc is subject to 10% preferential rate.

RULING:
NO. The concessional tax rate of 10 percent provided in the RP-Germany Tax Treaty should apply only if the taxes imposed upon royalties
in the RP-US Tax Treaty and in the RP-Germany Tax Treaty are paid under similar circumstances. This would mean that private respondent
must prove that the RP-US Tax Treaty grants similar tax reliefs to residents of the United States in respect of the taxes imposable upon
royalties earned from sources within the Philippines as those allowed to their German counterparts under the RP-Germany Tax Treaty.

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 CIR vs CA, GR No. 108576, Jan. 20, 1999

Facts:
Don Andres Soriano is a citizen and resident of the United States. ANSCOR is wholly owned and controlled by the family of Don Andres,
who are all non-resident aliens. Don Andres subscribed to 4,963 shares of the 5,000 shares originally issued. ANSCOR's authorized capital
stock was increased to P2,500,000.00 divided into 25,000 common shares with the same par value of the additional 15,000 shares, only
10,000 was issued which were all subscribed by Don Andres. This increased his subscription to 14,963 common shares. A month later, Don
Andres transferred 1,250 shares each to his two sons, Jose and Andres, Jr., as their initial investments in ANSCOR. Both sons are
foreigners. ANSCOR declared stock dividends.

Issue:
WON ANSCOR's redemption of stocks held as stock dividens from its stockholder can be considered as "essentially equivalent to the
distribution of taxable dividend" making the proceeds thereof taxable under the provisions of Sec. 83 of the 1939 Revenue Act.

Ruling:
Yes. The two purposes invoked by ANSCOR, under the facts of this case are no excuse for its tax liability. First, the alleged "filipinization"
plan cannot be considered legitimate as it was not implemented until the BIR started making assessments on the proceeds of the
redemption. Such corporate plan was not stated in nor supported by any Board Resolution but a mere afterthought interposed by the
counsel of ANSCOR. Being a separate entity, the corporation can act only through its Board of Directors.

El Oriente Fabrica VS Posadas, 56 Phil 147

Facts:
That on March 18, 1925, EL ORIENTE FABRICA DE TABACOS, INC., , in order to protect itself against the loss that it might suffer
by reason of the death of its manager, A. Velhagen, who had had more than thirty-five (35) years of experience in the manufacture of
cigars in the Philippine Islands, and whose death would be a serious loss to the plaintiff, procured from the Manufacturers Life Insurance
Co., of Toronto, Canada, thru its local agent E.E. Elser, an insurance policy on the life of the said A. Velhagen for the sum of $50,000.

Issue:
WON the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death,
are taxable as income.

Ruling:
No. "The following incomes shall be exempt from the provisions of this law: (a) The proceeds of life insurance policies paid to beneficiaries
upon the death of the insured ... ." Section 10, as amended, in Chapter II On Corporations, provides that, There shall be levied, assessed,
collected, and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation ...
a tax of three per centum upon such income ... ."

CIR vs COA, GR 101976, Jan. 29, 1993

FACTS:
On June 25, 1986, Savellano furnished the Bureau of Internal Revenue (BIR) with a confidential affidavit of information2 denouncing the
National Coal Authority (NCA) and the Philippine National Oil Company (PNOC) for non-payment of taxes totalling P234 Million on interest
earnings of their respective money placements with the Philippine National Bank (PNB) since October 15, 1984 to said date. Investigation
by the BIR confirmed the reported tax liabilities, and upon demands thereafter made, NCA and PNOC paid to the BIR the amounts of
taxes corresponding to the period October 15, 1984 to August 31, 1986.

ISSUE:
WON COA's disallowance is correct on the informer's reward under consideration that there was actually no revenue realized or recovered
as two (2) government agencies were involved.

HELD:
NO. This view is simplistic and merits no concurrence. It overlooks the fact that the two (2) government agencies involved, NCA and
PNOC, possess legal personalities separate and distinct from the Philippine government. Although both are government-owned and
controlled corporations, NCA and PNOC perform proprietary functions. Their revenues do not automatically devolve to the general coffers
of the government. Unless transferred to the Philippine government through the vehicle of taxation, no part of their revenues is available
for appropriation by the Legislature for expenditure in government projects; such revenues remain said agencies' in their entirety, to be
applied to and expended for their own exclusive purpose.

Zamora VS Collector, 8 SCRA 163

Facts:
Mariano Zamora, owner of the Bay View Hotel and Farmacia Zamora, Manila, filed his income tax returns the years 1951 and 1952. The
Collector of Internal Revenue found that he failed to file his return of the capital gains derived from the sale of certain real properties
and claimed deductions which were not allowable. The collector required him to pay the sums of P43,758.50 and P7,625.00, as deficiency
income tax for the years 1951 and 1952.

Issue:
Whether the CTA is correct in dissallowing P10,478.50, as promotion expenses incurred by his wife for the promotion of the Bay View
Hotel and Farmacia Zamora (which is ½ of P20,957.00, supposed business expenses)

Held:
Yes, the CTA is correct in disallowing the ½ of the expenses. In the case of Visayan Cebu Terminal Co., Inc. v. Collector of Int. Rev.,
G.R. No. L-12798, May 30, 1960, it was declared that representation expenses fall under the category of business expenses which are
allowable deductions from gross income, if they meet the conditions prescribed by law, particularly section 30 (a) [1], of the Tax Code:
1. that to be deductible, said business expenses must be ordinary and necessary expenses paid or incurred in carrying on any
trade or business;
20
 2. that those expenses must also meet the further test of reasonableness in amount;
3. that when some of the representation expenses claimed by the taxpayer were evidenced by vouchers or chits, but others
were without vouchers or chits, documents or supporting papers;
4. that there is no more than oral proof to the effect that payments have been made for representation expenses allegedly
made by the taxpayer and about the general nature of such alleged expenses;
5. that accordingly, it is not possible to determine the actual amount covered by supporting papers and the amount without
supporting papers, the court should determine from all available data, the amount properly deductible as
representation expenses.

Esso Standard VS CIR, 176 SCRA 149

FACTS:
ESSO deducted from its gross income for 1959, as part of its ordinary and necessary business expenses, the amount it had spent for
drilling and exploration of its petroleum concessions. However, the Commissioner disallowed the claim on the ground that the expenses
should be capitalized and might be written off as a loss only when a “dry hole” should result. Hence, ESSO filed an amended return where
it asked for the refund of P323, 270 by reason of its abandonment, as dry holes, of several of its oil wells. It also claimed as ordinary and
necessary expenses in the same return amount of P340, 822.04 representing margin fees it had paid to the Central Bank on its profit
remittances to its New York Office.

ISSUE:
WON the margin fees may be considered as ordinary and necessary expenses when paid.

HELD:
No. For an item to be deductible as a business expense, the expense must be ordinary and necessary; it must be paid or incurred within
the taxable year; and it must be paid or incurred in carrying on a trade or business. In addition, the taxpayer must substantially prove
by evidence or records the deductions claimed under law, otherwise, the same will be disallowed. There has been no attempt to define
“ordinary and necessary” with precision. However, as guiding principle in the proper adjudication of conflicting claims, an expenses is
considered necessary where the expenditure is appropriate and helpful in the development of the taxpayer’s business.

CM Hoskins VS CIR, 30 SCRA 434

Facts:
Petitioner, a domestic corporation engaged in the real estate business as brokers, managing agents and administrators, filed its income
tax return for its fiscal year ending September 30, 1957 showing a net income of P92,540.25 and a tax liability due thereon of P18,508.00,
which it paid in due course. CIR disallowed 4 items of deductions in the ITR. Court of Tax Appeals upheld the disallowance of an item
which was paid to Mr. C. Hoskins representing 50% of supervision fees earned and set aside the disallowance of the other 3 items.

Issue:
WON the the CIR was right its disallowance of the 4 items of deductions in the ITR (Mr.Hoskins supervision fees)?

Held:
The SC finds no merit in petitioner's appeal the 4 itemsare NOT deductible. Considering that in addition being Chairman of theBoard of
Directors of petitioner corporation, Hoskins owned 99.6% of its total authorizedcapital stock, was also salesman- broker for his company
receiving a 50% share of thesales commissions earned by petitioner, besides monthly salary and other allowances and benefits, the Tax
court correctly ruler that the payment to Hoskins of his share in thesupervision fees received by petitioner as managing agent of the real
estate projects of Paradise Farms and Realty Investments (of which he is also a stockholder) wasinordinately large and could not be
accorded the treatment of ordinary and necessaryexpenses allowed as deductible items in the Tax Code.

Gancayco VS Collector, 1 SCRA 980

Facts:
On May 10, 1950, Santiago Gancayco filed his income tax return for the year 1949. He claims P27,459 as farming expenses and
representation expenses of P31,753.97. Two (2) days later, Collector of Internal Revenue assessed his income tax liability for that year
amounted P9,793.62, which he paid on May 15, 1950. A year later, on May 14, 1951, CIR notify Gancayco that there was still tax due
from him in the amount of P29,554.05 upon investigation. Gancayco sought a reconsideration which was partly granted by the CIR
reducing his income tax deficiency for 1949 to P16,860.31.

Issue:
WON the farming and representation expenses claimed by Gancayco which was not allowed by the CIR are deductible for income tax
purposes.
Held:
No. Section 30(a)(1) of the Tax Code provides that “All the ordinary and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually
rendered; traveling expenses while away from home in the pursuit of a trade or business; and rentals or other payments required to be
made as a condition to the continued use or possession, for the purposes of the trade or business, of property to which the taxpayer has
not taken or is not taking title or in which he has no equity.”

Commissioner VS Philippine Acetylene, 39 SCRA 70

Facts:
The petitioner is a corporation engaged in the manufacture and sale of oxygen and acetylene gases. During the period from June 2, 1953
to June 30, 1958, it made various sales of its products to the National Power Corporation, an agency of the Philippine Government, and
to the Voice of America an agency of the United States Government. The sales to the NPC amounted to P145,866.70, while those to the
VOA amounted to P1,683, on account of which the respondent Commission of Internal Revenue assessed against, and demanded from,
the petitioner the payment of P12,910.60 as deficiency sales tax and surcharge.

Issue:
WON sales tax may be collected from NPC which is exempt from payment of all taxes

21
Ruling:
YES. In 1941, Alabama v. King & Boozer, “The asserted right of the one to be free of taxation by the other does not spell immunity from
paying the added costs, attributable to the taxation of those who furnish supplies to the Government and who have been granted no tax
immunity.” In Esso Standard Oil v. Evans, a contractor is not exempt from the payment of a state privilege tax on the business of storing
gasoline simply because the Federal Government with which it has a contract for the storage of gasoline is immune from state taxation.

Goodrich VS Collector, CTA Case No. 468, June 8, 1965

FACTS:
Goodrich was assessed by the CIR for deficiency taxes for the years 1951 and 1952, respectively. These assessments were based on
disallowed deductions, claimed by Goodrich, consisting of several alleged bad debts, in the aggregate sum of P50,455.41, for the year
1951, and the sum of P30,138.88, as representation expenses allegedly incurred in the year 1952. Goodrich claimed for deductions based
upon receipts issued, not by entities in which the alleged expenses had been incurred, but by the officers of Goodrich who allegedly paid
for them. The CTA allowed the deduction of the bad debts and representation expense.

ISSUE:
WON the deductions must be allowed.

RULING:
NO. The claim for deduction must be based not on the receipts issued by the officers of the taxpaying entity but on receipts issued by
the entities where the alleged expenses had been incurred. Receipts or chits would be issued by such entities if the expenses had actually
been incurred. The receipts issued by the officers of the taxpayer merely attest to their claim that they had incurred and paid such
expenses; they do not establish payment of said alleged expenses to the entities where the same are said to have been incurred.

CIR vs Palanca, 18 SCRA 496

Facts:
The late Don Carlos Palanca, Sr. donated in favor of his son, Carlos Palanca Jr., herein shares of stock in La Tondeña, Inc. amounting to
12,500 shares. For failure to file a return on the donation within the statutory period, Carlos Jr. was assessed the sums of P97,691.23,
P24,442.81 and P47,868.70 as gift tax, 25% surcharge and interest, respectively, which he paid on June 22, 1955. On March 1, 1956,
Carlos Jr. filed with the BIR his income tax return for the calendar year 1955, claiming, among others, a deduction for interest
amounting to P9,706.45. Subsequently, on November 10, 1956, Carlos Jr. filed an amended return for the calendar year 1955, claiming
therein an additional deduction in the amount of P47,868.70 representing interest paid on the donee's gift tax.

Issue:
WON the amount paid as interest on unpaid taxes was paid upon an indebtedness within the contemplation of Section 30(b) (1) of the
Tax Code.

Ruling:
Yes. Carlos Jr. sought the allowance as deductible items from the gross income of the amounts paid by him as interests on delinquent
tax liabilities. Section 30(b) (1) of the Tax Code provides that in computing net income there shall be allowed as deductions — The
amount of interest paid within the taxable year on indebtedness, except on indebtedness incurred or continued to
purchase or carry obligations the interest upon which is exempt from taxation as income under this Title.

CIR vs Vda. De Prieto, 109 Phil 592

Facts:
On December 4, 1945, Consuelo conveyed by way of gifts to her four children, real property with a total assessed value of P892,497.50.
After the filing of the gift tax returns on or about February 1, 1954, the petitioner Commissioner of Internal Revenue appraised the real
property donated for gift tax purposes at P1,231,268.00, and assessed the total sum of P117,706.50 as donor's gift tax, interest and
compromises due thereon.

Issue:
WON the interest paid for the late payment of tax is deductible from gross income.

Ruling:
Yes. Under the law, for interest to be deductible, it must be shown (1) that there be an indebtedness, (2) that there should be interest
upon it, and (3) that what is claimed as an interest deduction should have been paid or accrued within the year. It is here conceded that
the interest paid by respondent was in consequence of the late payment of her donor's tax, and the same was paid within the year it is
sought to be declared.

Paper Industries VS CA, 250 SCRA 434

FACTS:
In 1969, 1972 and 1977, Picop obtained loans from foreign creditors in order to finance the purchase of machinery and equipment
needed for its operations. In its 1977 Income Tax Return, Picop claimed interest payments made in 1977, amounting to P42,840,131.00,
on these loans as a deduction from its 1977 gross income.

ISSUES:
WON Picop is entitled to deductions against income of interest payments on loans for the purchase of machinery and equipment.

HELD:
YES. We begin by noting that interest payments on loans incurred by a taxpayer (whether BOI-registered or not) are allowed by the
NIRC as deductions against the taxpayer's gross income. Thus, the general rule is that interest expenses are deductible against gross
income and this certainly includes interest paid under loans incurred in connection with the carrying on of the business of the
taxpayer. 20 In the instant case, the CIR does not dispute that the interest payments were made by Picop on loans incurred in connection

22
with the carrying on of the registered operations of Picop, i.e., the financing of the purchase of machinery and equipment actually used
in the registered operations of Picop.

CIR vs Lednicky, GR L-18169, July 31, 1964

Facts:
The respondents, V. E. Lednicky and Maria Valero Lednicky, are husband and wife, respectively, both American citizens residing in the
Philippines, and have derived all their income from Philippine sources for the taxable years in question. In compliance with local law, the
aforesaid respondents, filed their income tax return for 1956, reporting therein a gross income of P1,017,287.65 and a net income of
P733,809.44 on which the amount of P317,395.4 was assessed after deducting P4,805.59 as withholding tax. Pursuant to the petitioner's
assessment notice, the respondents paid the total amount of P326,247.41, inclusive of the withheld taxes, on 15 April 1957.

Issue:
WON a citizen of the United States residing in the Philippines, who derives income wholly from sources within the Republic of the
Philippines, may deduct from his gross income the income taxes he has paid to the United States government for the taxable year.

Held:
No, an alien resident who derives income wholly from sources within the Philippines may not deduct from gross income the income taxes
he paid to his home country for the taxable year. The right to deduct foreign income taxes paid given only where alternative right to
tax credit exists.

Gutierrez vs Collector, 14 SCRA 33

FACTS:
Lino Gutierrez was primarily engaged in the business of leasing real property for which he paid real estate broker’s privilege tax. The
Collector assessed against Gutierrez deficiency income tax amounting to P11, 841. The deficiency tax came about by the disallowance of
deductions from gross income representing depreciation expenses Gutierrez allegedly incurred in carrying on his business.

ISSUE:
Whether or not the claims for deduction by herein petitioner were proper and allowable

HELD:
As a rule, for an item to be deductible, an expense must be (1) ordinary and necessary;(2) paid or incurred within the taxable year; and,
(3) paid or incurred in carrying on a trade or business.

Fernandez Hermanos VS CIR, 29 SCRA 552

Facts:
These four appears involve two decisions of the Court of Tax Appeals determining the taxpayer's income tax liability for the years 1950
to 1954 and for the year 1957. Both the taxpayer and the Commissioner of Internal Revenue, as petitioner and respondent in the cases
a quo respectively, appealed from the Tax Court's decisions, insofar as their respective contentions on particular tax items were therein
resolved against them. Since the issues raised are interrelated, the Court resolves the four appeals in this joint decision.

Issue:
WON CTA was correct in modifying CIRís deficiency assessment

Held:
When the company eased to operate, it had no assets, in other words, completely insolvent. This information as to the insolvency of the
Company ó reached (the taxpayer) in 1950, when it properly claimed the loss as a deduction in its 1950 tax return, pursuant to Section
30(d) (4) (b) or Section 30 (e) (3) of the National Internal Revenue Code. Thus, there was adequate basis for the writing off of the stock
as worthless securities.

Plaridel Security VS CIR, 21 SCRA 1187

Facts:
Plaridel Surety & Insurance Co., as surety, and Constancio San Jose, as principal, solidarily executed a performance bond in the penal
sum of P30,600.00 in favor of the P. L. Galang Machinery Co., Inc., to secure the performance of San Jose's contractual obligation to
produce and supply logs to the latter. Plaridel is a domestic corporation engaged in bonding business. San Jose and one Ramon Cuervo,
on the other hand, execute an indemnity agreement obligating themselves, solidarily, to indemnify Plaridel for whatever liability it may
incur by reason of said performance bond. Galang Machinery sued on the performance bond when San Jose failed to deliver the logs.

Issue:
WON Plaridel Surety and Insurance Company can claim the loss as deduction for income tax purposes.

Held:
No. The Court held that loss is deductible only in the taxable year it actually happens or is sustained. However, if it is compensable by
insurance or otherwise, deduction for the loss suffered is postponed to a subsequent year, which, to be precise, is that year in which it
appears that no compensation at all can be had, or that there is a remaining or net loss, i.e., no full compensation.

China Bank VS CA, 336 SCRA 178

Facts:
China Banking Corporation made a 53% equity investment in the First CBC Capital (Asia) Ltd., a Hongkong subsidiary engaged in financing
and investment with "deposit-taking" function. The investment amounted to P16,227,851.80, consisting of 106,000 shares with a par
Value of P100 per share.
ISSUE:
WON THE INVESTMENT IN FIRST CBC CAPITAL BE CONSIDERED AN ORDINARY LOSS DEDUCTIBLE FROM CHINA BANK’S GROSS
INCOME.

23
RULING:
NO. Subject to certain exceptions, such as the compensation income of individuals and passive income subject to final tax, as well as
income of non-resident aliens and foreign corporations not engaged in trade or business in the Philippines, the tax on income is imposed
on the net income allowing certain specified deductions from gross income to be claimed by the taxpayer.Among the deductible items
allowed by the National Internal Revenue Code ("NIRC") are bad debts and losses.

Collector VS Goodrich, 21 SCRA 1336

FACTS:
Goodrich was assessed by the CIR for deficiency taxes for the years 1951 and 1952, respectively. These assessments were based on
disallowed deductions, claimed by Goodrich, consisting of several alleged bad debts, in the aggregate sum of P50,455.41, for the year
1951, and the sum of P30,138.88, as representation expenses allegedly incurred in the year 1952.

ISSUE:
WON the deductions must be allowed.

RULING:
NO. The claim for deduction must be based not on the receipts issued by the officers of the taxpaying entity but on receipts issued by
the entities where the alleged expenses had been incurred. Receipts or chits would be issued by such entities if the expenses had actually
been incurred. The receipts issued by the officers of the taxpayer merely attest to their claim that they had incurred and paid such
expenses; they do not establish payment of said alleged expenses to the entities where the same are said to have been incurred.

Basilan Estates VS CIR, 21 SCRA 17

Facts:
Basilan Estates, Inc. is a Philippine corporation engaged in the coconut industry. It filed its income tax returns for 1953 and paid an
income tax of P8,028. CIR assessed Basilan Estates a deficiency income tax of P3,912 for 1953 and P86,876.85 as 25% surtax on
unreasonably accumulated profits as of 1953 pursuant to Section 25 of the Tax Code. Basilan Estates filed before the CTA a petition for
review of the Commissioner's assessment, alleging prescription of the period for assessment and collection; error in disallowing
claimed depreciations (overclaimed depreciation for P10,500.49), travelling and miscellaneous expenses; and error in finding
the existence of unreasonably accumulated profits and the imposition of 25% surtax thereon.

Issue:
WON the depreciation shall be determined on the acquisition cost

Held:
Yes. Depreciation is the gradual diminution in the useful value of tangible property resulting from wear and tear and normal obsolescence.
The term is also applied to amortization of the value of intangible assets, the use of which in the trade or business is definitely limited in
duration. Depreciation commences with the acquisition of the property and its owner is not bound to see his property gradually waste,
without making provision out of earnings for its replacement.

Zamora VS Collector, 8 SCRA 163

Facts:
Mariano Zamora, owner of the Bay View Hotel and Farmacia Zamora, filed his income tax returns the years 1951 and 1952. The Collector
of Internal Revenue found that he failed to file his return of the capital gains derived from the sale of certain real properties and claimed
deductions which were not allowable. The collector required him to pay the sums of P43,758.50 and P7,625.00, as deficiency income tax
for the years 1951 and 1952, respectively.

Issue:
WON the 2-½% rate of depreciation of the Bay View Hotel building is proper.

Ruling:
Yes. CTA, in estimating the reasonable rate of depreciation allowance for hotels made of concrete and steel at 2-½%, the three factors
just mentioned had been taken into account already. As the lower court based its findings on Bulletin F, petitioner Zamora, argues that
the same should have been first proved as a law, to be subject to judicial notice.

Roxas VS CTA, 23 SCRA 276

FACTS:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession the following
properties: (1) Agricultural lands with a total area of 19,000 hectares, situated in the municipality of Nasugbu, Batangas province; (2) A
residential house and lot located at Wright St., Malate, Manila; and (3) Shares of stocks in different corporations.

ISSUES:
WON the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable?

Ruling:
NO. The Commissioner of Internal Revenue contends that Roxas y Cia could be considered a real estate dealer because it engaged in
the business of selling real estate. The business activity alluded to was the act of subdividing the Nasugbu farm lands and selling them
to the farmers-occupants on installment. To bolster his stand on the point, he cites one of the purposes of Roxas y Cia. as contained in
its articles of partnership.

24
 Gancayco VS Collector, 1 SCRA 980

Facts:
Gancayco filed his income tax return for the year 1949. Two (2) days later, respondent Collector of Internal Revenue issued the
corresponding notice advising him that his income tax liability for that year amounted P9,793.62, which he paid. A year later, respondent
wrote a communication, notifying Gancayco, inter alia, that, upon investigation, there was still due from him, a deficiency income tax for
the year 1949, the sum of P29,554.05. Gancayco sought a reconsideration, which was part granted by respondent, informed petitioner
that his income tax defendant efficiency for 1949 amounted to P16,860.31.

Issue:
Whether the sum of P16,860.31 is due from Gancayco as deficiency income tax for 1949 hinges on the validity of his claim for deduction
of two (2) items, namely: (a) for farming expenses, P27,459.00; and (b) for representation expenses, P8,933.45.

Held:
Both are not valid deductions such that the deficiency assessment is valid. Gancayco's claim for representation expenses aggregated
P31,753.97, of which P22,820.52 was allowed, and P8,933.45 disallowed.

Roxas VS CA, GR No. L- 25043, 26 April 1968

Facts:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession Agricultural
lands in Nasugbu, residential house and lot, and shares of stocks in different corporations. To manage the aforementioned properties,
said children, namely, Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership called Roxas y Compania.

Issue:
WON the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable.

Ruling:
No. It should be borne in mind that 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 bounden 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. However, the Government could not comply
with its duty for lack of funds.

Cynamid Philippines Inc. vs. CA, GR No. 108067, 20 January 2000

Facts:
Cynamid Philippines Inc. is a corporation organized under Philippine laws , wholly owned subsidiary of American Cyanamid Co. based in
Maine, USA. It is engaged in the manufacture of pharmaceutical products and chemicals, a wholesaler of imported finished goods and
an imported/indenter. In 1985, the CIR assessed on petitioner a deficiency income tax of P119, 817 for the year 1981.

Issue:
WON the accumulation of income was justified.

Held:
Yes. In order to determine whether profits are accumulated for the reasonable needs of the business to avoid the surtax upon the
shareholders, it must be shown that the controlling intention of the taxpayer is manifested at the time of the accumulation,
not intentions subsequently, which are mere afterthoughts. The accumulated profits must be used within reasonable time after
the close of the taxable year.

CIR vs Tuason, GR No. 85749, 15 may 1989

Facts:
Antonio Tuason, Inc did not object to the first and second items and paid the amounts demanded. However, it protested the assessment
on a 25% surtax on the third item 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 real estate broker. The request for reinvestigation was granted on condition that a waiver
of the statute of limitations should be filed by the private respondent.

Issues:
Whether or not private respondent Antonio Tuason, Inc. is a holding company and/or investment company

Held:
The petition is meritorious. The CTA conceded that the Revenue Commissioner's determination that Antonio Tuason, Inc. was a mere
holding or investment company, was "presumptively correct", 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 rental
realized from the sale of realty.

The Manila Wine VS CIR, G.R. No. L-26145; February 20, 1984

Facts:
The Manila Wine Merchants, Inc. (Manila Wine) is a domestic corporation organized in 1937 and is principally engaged in the importation
and sale of whisky, wines, liquors and distilled spirits. On December 31, 1957, the CIR caused the examination of Manila Wine’s books
of accounts and found the latter of having unreasonably accumulated surplus of P428,934.32 for the calendar year 1947 to 1957, in
excess of the reasonable needs of the business subject to the 25% surtax imposed by Section 25 of the Tax Code.

Issue:
WON the purchase of the U.S.A. Treasury bonds by Manila Wine in 1951 can be construed as an investment to an unrelated business
availed of by Manila Wine for the purpose of preventing the imposition of the surtax upon Manila Wine’s shareholders by permitting its
earnings and profits to accumulate beyond the reasonable needs of the business.
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Held:
Yes. In order to determine whether profits are accumulated for the reasonable needs of the business as to avoid the surtax upon
shareholders, the controlling intention of the taxpayer is that which is manifested at the time of accumulation not subsequently declared
intentions which are merely the product of afterthought (Basilan Estates, Inc. v. Comm. of Internal Revenue, 21 SCRA 17 citing Jacob
Mertens, Jr., The law of Federal Income Taxation, Vol. 7, Cumulative Supplement, p. 213; Smoot and San & Gravel Corp. v. Comm., 241
F 2d 197).

CIR vs Procter & Gamble, G.R. No. L-66838, 2 December 1991

Facts:
In 1974 and 1975, Procter and Gamble Philippine Manufacturing Corporation declared dividends payable to its parent company and sole
stockholder, Procter and Gamble Co., Inc. (USA) amounting to P24,164,946.30, from which dividends the amount of P8,457,731.21
representing the 35% withholding tax at source was deducted. P&G-Phil filed with CIR a claim for refund or tax credit in the amount of
P4,832,989.26 claiming, among other things, that pursuant to Section 24 (b) (1) of the National Internal Revenue Code ("NITC"), 1 as
amended by Presidential Decree No. 369, the applicable rate of withholding tax on the dividends remitted was only 15% and not 35%
of dividends. CTA ordered the refund or grant of tax credit.

Issue:
WON P&G-Phil has the capacity as a taxpayer to claim a refund and to commence an action for such refund.

Ruling:
Yes. It thus becomes important to note that under Section 53 (c) of the NIRC, the withholding agent who is "required to deduct and
withhold any tax" is made " personally liable for such tax" and indeed is indemnified against any claims and demands which the
stockholder might wish to make in questioning the amount of payments effected by the withholding agent in accordance with the
provisions of the NIRC. The withholding agent, P&G-Phil., is directly and independently liable 3 for the correct amount of the tax that
should be withheld from the dividend remittances.

CIR vs Procter & Gamble, G.R. No L-66838 April 15, 1988

Facts:
Procter and Gamble Philippine Manufacturing Corporation (hereinafter referred to as PMC-Phil.) is a wholly owned subsidiary of Procter
and Gamble, U.S.A. (herein referred to as PMC-USA), a non-resident foreign corporation in the Philippines, not engaged in trade and
business. As such PMC-U.S.A. is the sole shareholder or stockholder of PMC Phil., as PMC-U.S.A. owns wholly or by 100% the voting
stock of PMC Phil. and is entitled to receive income from PMC-Phil. in the form of dividends, if not rents or royalties. In addition, PMC-
Phil has a legal personality separate and distinct from PMC-U.S.A.
Issue:
WON PMC-Phil., is entitled to the preferential 15% tax rate on dividends declared and remitted to PMC-U.S.A.

Held:
No. The submission of the CIR that PMC-Phil. is but a withholding agent of the government and therefore cannot claim reimbursement
of the alleged over paid taxes, is completely meritorious. The real party in interest being the mother corporation in the United States, it
follows that American entity is the real party in interest, and should have been the claimant in this case.

CIR vs. Johnsons & Sons, Inc., GR No. 127105, 25 June 1999

FACTS:
Johnsons & Sons, Inc, a domestic corporation organized and operating under the Philippine laws, entered into a license agreement with
SC Johnson and Son, United States of America (USA), a non-resident foreign corporation based in the U.S.A. pursuant to which the
[respondent] was granted the right to use the trademark, patents and technology owned by the latter including the right to manufacture,
package and distribute the products covered by the Agreement and secure assistance in management, marketing and production from
SC Johnson and Son, U. S. A.

ISSUE:
WON J&J is entitled for the claim for refund of the subject overpaid withholding tax pursuant to the “most favored nation” clause rule.

HELD:
No, the concessional tax rate of 10% provided for in the RP- German Tax Treaty could not apply to taxes imposed upon royalties in the
RP-US Tax Treaty since the two taxes imposed under the two tax treaties are not paid under similar circumstances, they are do not
contain similar provisions on tax crediting.

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