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COURSE OUTLINE IN

TAXATION 1
2nd Semester, AY 2018-2019

A. Classroom Rules:
1. Attendance will be checked at the beginning of every meeting.
2. Quiz and reporting will be conducted every meeting. Students are expected, therefore, to come to
class prepared and to have read the materials scheduled to be covered during the meeting. When a
student is reporting, the rest of the class is expected to listen to him. Students are encouraged to
participate in the discussion by asking questions.
3. Electronic gadgets are not prohibited during class hours. A student is expected, however, to turn
off his mobile phone or to put it on silent mode as soon as he steps into the classroom. If the
student expects a call during the meeting, he can take the call by discretely leaving the classroom.
Laptops, tablets, and other similar electronic devices, are not, likewise, prohibited but the
students who are called to recite should close these electronic devices for the duration of their
recitation. The same rule applies to mobile phones that serve as data storage.
4. Any student may discretely leave the classroom if and when absolutely necessary.

B. Grading System:
Report - 20%
Quiz - 30%
Mid-Term Exam - 25%
Final Exam - 25%

C. Reference/s:
___________________
___________________

OUTLINE PROPER

TAX GENERAL PRINCIPLES AND REMEDIES

I. General Principles of Taxation

A. Definition and Concept of Taxation

B. Theory and Basis of Taxation


– 71 Am Jur 2nd 346-347
– CIR vs. Algue, Inc., et. al., L-28896, 02/17/1988 168 SCRA 9
– Philippine Guaranty Co. Inc. v. CIR 13 SCRA 775
– NPC v. Cabanatuan, GR 149110, April 19, 2003
– Lorenzo V. Posadas, 64 Phil 353

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

C. Scope and Nature of Taxation


– Art. VI, Sec. 28, Art. VI, 1987 Constitution
– CIR vs. Reyes (480 SCRA 382, 377)
– Hilado vs. CIR 100 Phil 288
D. Stages of Taxation
1. Levy
2. Assessment and Collection
3. Payment
4. Refund

E. Purpose of Taxation
1. Revenue-raising
– CIR vs. Algue, Inc., et. al. L-28896, 02/17/1988 168 SCRA 9
– PAL vs. Edu. 164 SCRA 320
– Tolentino vs. Secretary of Finance, 233 SCRA 630, 249 SCRA 628
2. Non-revenue/special or regulatory
– Osmeña vs. Orbos, 220 SCRA 703
– Caltex vs. COA 208 SCRA 755
– CIR vs. Central Luzon Drug Corp (456 SCRA 414, 445)

F. Scope and Limitation of Taxation


1. Inherent Limitations
a. Public purpose
– Lutz vs. Araneta, 98 Phil. 48
– Pascual vs. Secretary of Public Works, 110 Phil 331
b. Inherently Legislative
– Sec. 5, Art. X, 1987 Constitution
– Sec. 28(2), Art. VI, 1987 Constitution
– Sec. 401, Tariff and Customs Code
– Phil. Comm. Satellite Corp. vs. Alcuaz, 180 SCRA 219
– Meralco vs. Province of Laguna, 306 SCRA 750
– Pepsi-Cola Co. vs. City of Butuan, 24 SCRA 789
– Smith Bell & Co. vs. CIR, L-28274, July 25, 1975
– LTO vs. City of Butuan, supra
– City Govt. of Quezon City vs. Bayantel, GR 162015
– Abakada Guro Party List v. Ermita (469 SCRA 1, 122, 123-124)
1) General Rule
2) Exception- Delegation of Taxation Power:
a) Delegation to local governments
b) Delegation to the President
c) Delegation to administrative agencies

c. Territoriality or Situs of Taxation


– Manila Gas vs. Collector, 62 Phil 895
– Vegetable Oil Corp. vs. Trinidad, 45 Phil 822
– Wells Fargo Bank vs. Collector, 70 Phil 325
– Iloilo Bottlers vs. Iloilo City, 164 SCRA 607
– CIR vs. BOAC, 149 SCRA 395
– Hopewell Power vs. Commissioner, CTA Case 5310, Nov. 18, 1998
– Smith vs. Commissioner, CTA Case 6268, Sept. 12, 2002
– Collector vs. Lara, 102 Phil. 813
1) Situs of Taxation
a) Meaning
b) Situs of Income Tax
i. From sources within the Philippines
ii. From sources without the Philippines
iii. Income partly within and partly without the Philippines
2) Situs of Property Taxes
a) Taxes on Real Property
b) Taxes on Personal Property
3) Situs of Excise Tax
a) Estate Tax
b) Donor’s Tax
4) Situs of Business Tax
a) Sale of Real Property
b) Sale of Personal Property
c) VAT
d. International Comity
– Sec. 2, Art. XI, 1987 Constitution
– Tañada vs. Angara, GR 118295, May 2, 1997
– Mitsubishi Corp. vs. CIR, CTA Case 6139, Dec. 17, 2003
e. Exemption of Government Entities, Agencies and Instrumentalities
– Sec. 27(C) and 30(I), NIRC
– E.O. 93
– PD 1931
– Maceda vs. Macaraig
– Mactan Cebu Airport vs. Marcos, GR 120082, Sept. 11, 1996
– BIR Ruling No. 013-2004, Sept. 13, 2004
2. Constitutional Limitations
a. Provisions Directly Affecting Taxation
1) Prohibition against imprisonment for non-payment of poll tax
– Sec. 20, Art. III, 1987 Constitution
2) Uniformity and equality of taxation
– Sec. 28(1), Art. VI, 1987 Constitution
– Pepsi-Cola vs. Butuan City, 24 SCRA 789
– Manila Race Horse vs. dela Fuente, 88 Phil. 60
– Sison vs. Ancheta, 130 SCRA 654
– Tolentino vs. Sec. of Finance, 249 SCRA 628
3) Grant by Congress of authority to the President to impose tariff rates
4) Prohibition against taxation of religious, charitable s and educational
institutions
– Sec. 28(3), Art. VI, 1987 Constitution
– Lladoc vs. CIR, 14 SCRA 292
– Province of Abra vs. Hernando, 107 SCRA 1021
– Abra Valley College vs. Aquino, 162 SCRA 106
5) Prohibition against taxation of non-stock, non-profit educational
institutions
– Sec. 4(3), Art. XIV, 1987 Constitution
– Sec. 28(3), Art. VI, 1987 Constitution
– Secs. 27(B) and 30(H), NIRC
– DOF Order 137-87
– DOF Order 149-95BIR Revenue Memorandum Circular (RMC) No. 76-2003
– BIR RMC No. 45-95]
– BIR Revenue Regulations No. 13-98
– CIR vs. CA & YMCA, 298 SCRA 83
6) Passage of Tax Bills/Granting of Tax Exemption
– Sec. 24, Art. VI, 1987 Constitution
– Sec. 28(4), Art. VI, 1987 Constitution
– Tolentino vs. Secretary of Finance, 249 SCRA 628
7) Prohibition on use of tax levied for special purpose
8) President’s veto power on appropriation, revenue, tariff bills
– Sec. 27(2), Art. VI, 1987 Constitution
9) Non-impairment of the SC jurisdiction
– Sec. 5(2)(b), Art VIII, 1987 Constitution
10) Grant of power to the local government units to create its own sources of
revenue
11) Flexible tariff clause
12) Exemption from real property taxes
13) No appropriation or use of public money for religious purposes/Freedom
of religious worship
– Sec. 5, Art. III, 1987 Constitution
– American Bible Society vs. Manila, 101 Phil. 386
b. Provisions Indirectly Affecting Taxation
1) Due process
– Sec. 1, Art III, 1987 Constitution
– Commissioner of Customs vs. CTA & Campos Rueda Co., 152 SCRA 641
– Phil. Bank of Commerce vs. CIR, 302 SCRA 241
– Sison vs. Ancheta, 130 SCRA 654
2) Equal protection
– Sec. 1, Art III, 1987 Constitution
– Ormoc Sugar Co. vs. Treasurer of Ormoc City, 22 SCRA 603
– Villegas vs. Hsui Chiong Tsai Pao, 86 SCRA 270
– Shell Co. vs. Vano, 94 Phil. 388
– Tiu vs. CA, 301 SCRA 279
– Tan vs. Del Rosario, 237 SCRA 324
– Phil. Rural Electric vs. Secretary, GR 143706, June 10, 2003
3) Religious freedom
4) Non-impairment of obligations on contracts
– Sec. 10, Art III & Sec. 11, Art. XII, 1987 Constitution
– CIR vs. Lingayen Gulf Electric Co. 164 SCRA 67
– Misamis Oriental vs. CEPALCO, 181 SCRA 38
– Phil. Rural Electric vs. Secretary

G. Characteristics/Extent of Taxation
– Sison vs. Ancheta, 130 SCRA 654
– CIR vs. Pineda, 21 SCRA 105
– Phil. Guaranty vs. CIR, 13 SCRA 775
– Collector vs. Yuseco, 3 SCRA 313

H. Principles of Sound Tax System


– Chavez vs. Ongpin 186 SCRA 331
– Taganito Mining vs. CIR, CTA Case 4702, April 28, 1995

1. Fiscal Adequacy
2. Theoretical Justice
3. Administrative Feasibility

I. Power of Taxation Compared with Other Powers


– Roxas vs. CTA, 23 SCRA 276
– Tañada vs. Angara, GR 118295, May 2, 1997
– LTO vs. City of Butuan, GR 131512, Jan. 20, 3000
– Phil. Match Co. vs. Cebu, 81 SCRA 99
– Matalin vs. Mun. Council of Malabang, 143 SCRA 404
– Lutz vs. Araneta, 98 Phil 48
– NTC vs. CA, 311 SCRA 508

1. Police Power
2. Power of Eminent Domain

J. Doctrines in Taxation
1. Prospectivity of tax laws
2. Imprescriptibility
3. Construction and Interpretation of
a. Tax laws
1) Sources
a) Constitution
b) Statutes
i. RA 8424, as amended
ii. RA 9337
iii. Tariff and Customs Code
iv. Book II LGC
v. Special Laws
c) Administrative Issuances
i. BIR Revenue Administrative Order (RAO) No. 1-2003
ii. Revenue Regulations
 Secs. 244-245, NIRC
 RAO 1-2003
 Revenue Memorandum Circular 20-86
 Art. 7 Civil Code
 Asturias Sugar Central vs. CIR, 29 SCRA 617
 Tan v. Del Rosario, 237 SCRA 234
 CIR vs. Seagate Technology, GR 153866, Feb. 11, 2005
iii. BIR Rulings
 Sec. 4, 246, NIRC
 PBCOM vs. CIR, 302 SCRA 241
d) Tax Revenue/Ordinances
– Tuazon vs. CA, 212 SCRA 739
– Hagonoy Market Vendor vs. Municipality of Hagonoy, GR 137621, Feb. 6,
2002
– Jardine Davies vs. Aliposa, GR 118900, Feb. 27, 20003
e) Tax Treaties
– Tañada vs. Angara, GR 118925, May 2, 1997
f) Case Laws (SC/CA/CTA)
g) Legislative Materials
2) General Rule
3) Exception
b. Tax exemption and exclusion
1) General Rule
2) Exception
c. Tax rules and regulations
1) General rule only
d. Penal provisions of tax laws
e. Non-retroactive application to taxpayers
1) Exceptions
– Lorenzo vs. Pozadas, Jr., et. al. 64 Phil 353
4. Exemption from taxation
a. In General
– (Meaning of exemption from taxation, nature, kinds, rationale/ground, revocation)
– Greenfield v. Meer, 77 Phil 394
– Basco vs. PAGCOR, 196 SCRA 52
– CIR vs. Botelho Shipping Corp.
– CIR vs. CTA, GCL Retirement Plan, 207 SCRA 487
– CIR vs. Guerrero, 21 SCRA 180
– Philippine Acetylene Co., Inc. vs. CIR ,GR L-19707, 8/17/1967, 20 SCRA 1056
– Maceda vs. Macaraig, Jr., 197 SCRA 771
– Sea-Land Service vs. CA, 357 SCRA 441
– Davao Gulf vs. CIR, GR 117359, July 23, 1998
– PLDT vs. Davao City, GR 143867, Aug. 22, 2001
b. Exemption Compared with Other Terms
1) Tax Remission/Condonation
– Surigao Con. Min. vs. Collector, 9 SCRA 728
2) Tax Amnesty
– PD 370
– EO 399 (as amended by EO 422); BIR Revenue Regulations
Nos. 6-005 and 10-2005
– CIR vs. CA, 240 SCRA 368
– CIR vs. Marubeni, GR 137377, Dec. 18, 2001
3) Exclusion/Deduction
– Sec. 32(B), NIRC
– Sec. 34, NIRC
c. Construction of Tax Exemptions
– Rodriguez, Inc. vs. Collector, 23 SCRA 119
– Republic Flour Mills vs. CIR, 31 SCRA 148
– Luzon Stevedoring Corp. vs. CTA, 163 SCRA 647
– Coconut Oil Refiners vs. Torres, GR 132527, July 29, 2005
– Maceda vs. Macaraig, 196 SCRA 771, 223 SCRA 217
5. Escape from taxation
a. Shifting of tax burden
1) Ways of shifting the tax burden
2) Taxes that can be shifted
3) Meaning of impact and incidence of taxation
a) Tax avoidance
b) Tax evasion
– Sec. 254 NIRC
– CIR vs. Toda GR 147188, 9/14/2004
– Republic vs. Gonzales, 13 SCRA 633
– Delpher Traders vs. IAC, 157 SCRA 349
– CIR vs. Lincoln Philippine Lie, GR 119176, Mar. 19, 2002
6. Tax amnesty
a. Definition
b. Distinguished from tax exemption
7. Double taxation
– Procter & Gamble Co. vs. Mun. of Jagna , 94 SCRA 894
– Sanchez vs. CIR, 97 Phil. 687
– Punzalan vs. Municipal Board of Manila, 95 Phil. 46
– CIR vs. SC Johnson & Sons, Inc. 309 SCRA 87
– Villanueva vs. City of Iloilo, 26 SCRA 578
– Ericsson Telecommunications, Inc. vs. City of Pasig, 538 SCRA 99, 114-115
a. Strict sense
b. Broad sense
c. Constitutionality of double taxation
d. Modes of eliminating double taxation

K. Definition, Nature and Characteristics of Taxes

L. Kinds of Taxes
1. As to object
a. Personal, capitation or poll tax
b. Property tax
c. Privilege tax
2. As to burden or incidence
a. Direct
b. Indirect
3. As to tax rates
a. Specific
b. Ad valorem
c. Mixed
4. As to purposes
a. General or fiscal
b. Special, regulatory or sumptuary
– Osmeña vs. Orbos (220 SCRA 703)
5. As to scope or authority to impose
a. National
b. Local
6. As to graduation
a. Progressive
b. Regressive
c. Proportionate

M. Requisites of a valid tax

N. Tax as distinguished from other forms of exactions


1. Debt
– Caltex vs. COA, 208 SCRA 726
– Francia vs. IAC, 162 SCRA 735
– RP vs. Ericta and Sampaguita Pictures, 172 SCRA 653
– Republic vs. Mambulao Lumber Company, 4 SCRA 622
– Philex Mining vs. CIR, GR 125704, Aug. 28, 1998
– Domingo vs. Carlitos, 8 SCRA 443
2. License fee
– Progressive Dev. Corp. vs. QC, 172 SCRA 629
– PAL vs. Edu, 164 SCRA 320
– ESSO vs. CIR, 175 SCRA 149
3. Special assessment 0
– Apostolic Prefect vs. Treasurer of Baguio, 71 Phil. 547
4. Toll
– Diaz vs. Secretary of Finance
– 71 Am Jur 351
5. Penalties
– NDC vs. CIR, 151 SCRA 472
6. Tariff/Customs Duties

II. Tax Remedies under the NIRC

A. Government’s Remedies
1. Assessment
a. Concept of assessment
– Commissioner of Internal Revenue vs. Court of Appeals (G.R. No.
104151)
– Republic of the Philippines vs. Court of Appeals (149 SCRA 351)
1) Requisites for valid assessment
2) Constructive methods of income determination
3) Inventory method for income determination
4) Jeopardy assessment
5) Tax delinquency and tax deficiency
b. Power of the Commissioner to make assessments and prescribe
additional requirements for tax administration and enforcement
1) Power of the Commissioner to obtain information, and to
summon/examine, and take testimony of persons
c. When assessment is made
1) Prescriptive period for assessment
a) False, fraudulent, and non-filing of returns
– Mambulao Lumber Company vs. Republic (132 SCRA 1)
2) Suspension of running of statute of limitations
– Republic vs. Hizon (320 SCRA 574)
d. General provisions on additions to the tax
1) Civil penalties
2) Interest
e. Assessment process
1) Tax audit
2) Notice of informal conference
3) Issuance of preliminary assessment notice (PAN)
4) Notice of informal conference
5) Issuance of preliminary assessment notice (PAN)
6) Exceptions to Issuance of PAN
7) Reply to PAN
8) Issuance of formal letter of demand and assessment notice/final
assessment notice
9) Disputed assessment
10) Administrative decision on a disputed assessment
f. Rendition of decision by Commissioner
1) Denial of protest
a) CIR’s actions equivalent to denial of protest
i. Filing of criminal action against taxpayer
ii. Issuing a warrant of distraint and levy
b) Inaction by Commissioner
2. Collection
a. Requisites
b. Prescriptive periods
3. Administrative remedies
a. Tax lien
b. Distraint of personal property including garnishment
1) Summary remedy of distraint of personal property
a) Procedure for distraint and garnishment
b) Sale of property distrained and disposition of proceeds
i. Release of distrained property upon payment prior to sale
c) Purchase by the government at sale upon distraint
d) Report of sale to BIR
e) Constructive distraint to protect the interest of the government
c. Summary remedy of levy on real property
1) Advertisement and sale
2) Redemption of property sold
3) Final deed of purchaser
d. Forfeiture to government for want of bidder
1) Remedy of enforcement of forfeitures
a) Action to contest forfeiture of chattel
b) Resale of real estate taken for taxes
c) When property to be sold or destroyed
d) Disposition of funds recovered in legal proceedings or obtained
from forfeiture
e. Further distraint or levy
f. Suspension of business operation
g. Non-availability of injunction to restrain collection of tax
4. Statutory Offenses and Penalties
a. Civil penalties
1) Surcharge
2) Interest
a) In General
b) Deficiency interest
c) Delinquency interest
d) Interest on extended payment
5. Compromise and Abatement of taxes
a. Compromise
– CIR vs. Abad, etc. (G.R. No. L-19627, June 27, 1968)
b. Abatement

B. Taxpayer’s Remedies
1. Assessment
a. Protesting assessment
1) Protest of assessment by taxpayer
– CIR vs. Villa (22 SCRA 3)
a) Protested assessment
b) When to file a protest
c) Forms of protest
2) Submission of documents within 60 days from filing of protest
3) Effect of failure to protest
b. Remedies of taxpayer to action by Commissioner
1) In case of denial of protest
2) In case of inaction by Commissioner within 180 days from
submission of documents
3) Effect of failure to appeal
2. Refund
a. Grounds and requisites for refund
b. Requirements for refund as laid down by cases
1) Necessity of written claim for refund
2) Claim containing a categorical demand for reimbursement
3) Filing of administrative claim for refund and the suit/proceeding
before the CTA within 2 years from date of payment regardless of
any supervening cause
c. Legal basis of tax refunds
d. Statutory basis for tax refund under the Tax Code
1) Scope of claims for refund
2) Necessity of proof for claim or refund
3) Burden of proof for claim of refund
4) Nature of erroneously paid tax/illegally assessed collected
5) Tax refund vis-à-vis tax credit
6) Essential requisites for claim of refund
e. Who may claim/apply for tax refund/tax credit
1) Taxpayer/withholding agents of non-resident foreign corporation
f. Prescriptive period for recovery of tax erroneously or illegally collected
g. Other consideration affecting tax refunds
3. Taxpayer’s suit impugning the validity of tax measures or acts of taxing
authorities
a. Taxpayer’s suit, defined
b. Distinguished from citizen’s suit
c. Requisites for challenging the constitutionality of a tax measure or act of
taxing authority
1) Concept of locus standi as applied in taxation
2) Doctrine of transcendental importance
3) Ripeness for judicial determination
– Maceda vs. Macaraig, Jr. (197 SCRA 771)
– Gonzales vs. Marcos (65 SCRA 624)
– Abaya vs. Ebdane (515 SCRA 720)

C. Organization and Function of the Bureau of Internal Revenue


1. Rule-making authority of the Secretary of Finance
a. Authority of Secretary of Finance to promulgate rules and regulations
b. Specific provisions to be contained in rules and regulations
c. Non-retroactivity of rulings
– BIR Ruling No. 370-2011 – Imposition of 20% withholding tax on
PEACE bonds
2. Power of the Commissioner to suspend the business operation of a taxpayer
– Oplan Kandado of the BIR

D. Judicial Remedies; Republic Act 1125 The Act that Created the Court of Tax Appeals
(CTA), as amended, and the Revised Rules of the Court of Tax Appeals
1. Jurisdiction of the Court of Tax Appeals
a. Exclusive appellate jurisdiction over civil tax cases
1) Cases within the jurisdiction of the Court en banc
2) Cases within the jurisdiction of the Court in divisions
b. . Criminal cases
1) Exclusive original jurisdiction
2) Exclusive appellate jurisdiction in criminal cases
2. Judicial Procedures
a. Judicial action for collection of taxes
1) Internal revenue taxes
2) Local taxes
a) Prescriptive period
b. Civil cases
1) Who may appeal, mode of appeal, effect of appeal
a) Suspension of collection of tax
i. Injunction not available to restrain collection
b) Taking of evidence
c) Motion for reconsideration or New trial
2) Appeal to the CTA, en banc
3) Petition for review on certiorari to the Supreme Court
c. Criminal cases
1) Institution and prosecution of criminal actions
a) Institution on civil action in criminal action
2) Appeal and period to appeal
a) Solicitor General as counsel for the People and government
officials sued in their official capacity
3) Petition for review on certiorari to the Supreme Court

INCOME TAXATION

I. Overview And General Principles


A. Income
1. Income Tax
2. When is Income Taxable?
- Conwiv.CTA,213SCRA83
- CIR v.BOAC, 149 SCRA 395
- Madrigal v. Rafferty, 38 Phil 414
- International Freighting v. CIR, 1354 F 2d 310
- Anderson v. Posadas, 66 Phil 205
- Umpanv.CIR,17SCRA703
- Republic v.Dela Rama, 18 SCRA 861
- Eisner v. Macomber, 252 US 89
- Raytheon Production v. CIR, 144 F2d 110
- CIR v. Tours Specialist, 183 SCRA 402
- CIR v. Javier, 199 SCRA 82
B. Capital Gain; Ordinary Gain; Presumed Gain
1. Capital Gain
2. Ordinary Gain
a. Business Income
b. Income from Trade/Practice of Profession
c. Passive Income
d. Other Forms
3. Presumed Gain
C. Income Tax Systems
1. Global Tax System
2. Schedular Tax System
3. Semi-schedular or Semi-global Tax System
D. Criteria in Imposing Philippine Income Tax
1. Nationality/Citizenship
2. Residence
3. Source
E. Tax Treaties

II. Taxpayers
A. General Principles
B. Individuals
1. Resident Citizens
2. Non-Resident Citizens
3. Overseas Filipino Workers
4. Resident Alien
5. Non-Resident Alien Engaged in Trade or Business
6. Non-Resident Alien Not Engaged in Trade or Business
7. Special Aliens
C. Corporations
– CIR v. Batangas Tayabas Bus Co., 102 Phil 822
1. Large Taxpayers
2. Partnership; Co-ownership; GPP
– Onav.CIR,45SCRA78
– Obilles v. CIR, L-681185, Oct. 20,1985
– Reyes v. Commissioner, 24 SCRA 198
– Gatchalian v. Collector, 67 Phil 666
– Evangelista v. Collector, 102 Phil 140
– Collector v. Batangas Transport, 102 Phil 822
– Tan v. CIR, GR L-109289, Oct. 3,1994
– Pascual v. CIR, 166 SCRA 560
– Afisco v. CIR, 302 SCRA 1
– Solidbank v. CIR, CTA Case No. 4868, June 19,1997
3. Joint Venture; Exempt v. Taxable
4. Domestic Corporations
5. Resident Foreign Corporations
– Branch v. Subsidiary
– Winship v. Philippine Trust Co., 90 Phil 744
– Marubeni v. CIR, 177 SCRA 500
6. Non-Resident Foreign Corporations
– CIR v. BOAC149 SCRA 395
– Marubeni v. CIR, 177 SCRA 500
– CIR v. Procter and Gamble, 204 SCRA 277
D. Estates and Trusts
– CIR v. Visayas Electric, 23 SCRA 715
– CIR v. CA, 207 SCRA 487
E. Registration of Taxpayers

III. Exempt Taxpayers


A. Exempt Individuals
1. Minimum Wage Earners
2. Senior Citizens
3. Under Tax Treaty
– Reagan v. CIR, 30 SCRA 968
– CIR v. Robertson, 143 SCRA 796
B. Exempt Corporations
– Collector v. Sinco, 100 Phil 127
– Jesus Sacred Heart College v. Collector, 100 Phil 127
– CIR v. CA, GR 124043, Oct. 14,1998
– CIR v. CA, GR 115349, Apr. 18,1997
– Xavier School v. CIR, CTA Case 1682, Oct. 8,1969

IV. Gross Income and Exclusions


A. Income from Whatever Source
- Gutierrez v. Collector, 101 Phil 713
- CIR v. BO AC, supra
- Eisner v. Macomber, 252 US 189
- Helvering v. Bruun, 309 US 461
- CIR v. Javier, 199 SCRA 824
1. Situs of Income
a. From Sources Within the Philippines
- CIR v. Japan Airlines, 202 SCRA 450
- CIR v. BOAC, 149 SCRA 395
- NDC v. CIR, 151 SCRA 472
- Air Canada v. CIR, CTA EB No. 86. Aug. 26,2005
- CIR v. CTA, 127 SCRA 9
- CIR v. Marubeni, GR 137377, Dec. 18,2001
- Alexander Howden v. Collector, GR L-19392, Apr. 14,1965
- Manila Electric v. Yatao, 69 Phil 89
- Phil. Guaranty v. CIR, GR L-22074, Apr. 30,1965
b. From Sources Without the Philippines
c. Partly Within/Without the Philippines
B. Compensation Income
- Henderson v. Collector, 1 SCRA 649; Convenience of the Employer Rule
- CIR v. Castaneda, 203 SCRA 72
- Polo v. CIR, GR L-78780, July 23,1987
- Endencia v. David, 93 Phil 696
- CIR v. Castaneda, 203 SCRA 72
- Reagan v. CIR, 30 SCRA 968
C. Pensions/Retirement Benefits/Separation Pay
- CIR v. CA, 203 SCRA 72
- CIR v. GCI Retirement, 207 SCRA 487
D. Passive Income
1. Interest Income
– CIR v. Mitsubishi Metal, 181 SCRA 214
– NDC v. CIR, GR L-53961, June 30,1987
2. Rentals/Leases
– Limpan v. CIR, 17 SCRA 70
3. Royalties
– -ClRv.SC Johnson, GR 127105, June 25,1999
– Philippine American Life v. OR, GR SP No. 31283, Apr. 25,1995
4. Dividends
- Republic v. Dela Rama, 18 SCRA 861
- CIR v. Manning, 66 SCRA 14
- Fisher v. Trinidad, 43 Phil 973
- CM Hoskins v. CIR, 30 SCRA 434
- Kuenzle v. CIR, 28 SCRA 365
- Wise & Co. v. Meer, GR L-48231, June 30,1947
- OR v. CA, GR 108576, Jan. 20,1999
- Yuchengco v. CIR, CTA Case No. 3429, Jan. 6,1988
- Philippine Telephone v. Collector, 58 Phil 639
5. Annuities and Insurance Proceeds
a. Exclusions:
1) Proceeds from Life Insurance
- El Oriente Fabrica v. Posadas, 56 Phil 147
2) Return of Premium Paid
3) Compensation for Injuries or Sickness
6. Prizes and Winnings/Awards/Rewards
- CIR v. COA, GR 101976, Jan. 29,1993
a. Exclusions:
1) PCSO and Lotto Winnings
2) Sports Competition Prizes
7. Other Types of Passive Income
E. Gains Derived from Dealings in Property
F. Business Income/ Income from Exercise of Profession
1. Exclusions:
a. Income Exempt Under a Treaty
b. Income Derived by Governmental/Political Subdivision from Exercise of
Essential Government Function
G. Partner's Distributive Share of the Gross Income of General Professional Partnerships
H. Exclusions under Special Laws

V. Deductions and Exemptions


A. Deductions in General
– Zamora v. Collector, 8 SCRA 163
– Esso Standard v. CIR, 176 SCRA 149
– QR v. General Foods, GR 143672, April 24,2003
– CM Hoskins v. QR, 30 SCRA 434
– Gancayco v. Collector, 1 SCRA 980
– Western Minolco v. CIR, 124 SCRA 121
– Commissioner v. Philippine Acetylene, 39 SCRA 70
– QR v. Arnoldus Carpentry, GR L-71122, Mar. 25,1988
– BPI v.Trinidad, 45 Phil 384
1. Kinds of Deductions
a. Itemized
b. Optional Standard
c. Special Deductions
2. Limitations and Substantiation
3. Allocation
- Yutivo Sons v. CIR, 1 SCRA 160
B. Allowable Deductions
1. Ordinary/Necessary Business Expenses
- Atlas Consolidated v. CIR, 102 SCRA 246
- Visayan Cebu Terminal v. Collector, 108 Phil 320
- Kuenzle v. CIR, GR L-12010, Oct. 20,1959
- Alhambra Cigar v. Collector, GR L-12026, May 29,2009
- Aguinaldo Industries v. Collector, 112 SCRA 136
- Goodrich v. Collector, CTA Case No. 468, June 8,1965
- Jamir v. Collector, 4 SCRA 718
- Hospital de San Juan De Dios v. CIR, 185 SCRA 273
- Felix Montenegro v. QR, CTA Case No. 695, Apr. 30,1969
- Collector v. Philippine Education Co., 99 Phil 319
2. Interest Expense
– CIR v. Palanca, 18 SCRA 496
– CIR v. Vda. de Prieto, 109 Phil 592
– Paper Industries v. CA, 250 SCRA 434
– CIR v. Itogon-Suyoc Mines, GR L-25399, July 29,1969
– Castro v. Collector, 6 SCRA 886
– Collector v. Fisher, 1 SCRA 93
3. Taxes
– CIR v. Lednicky, GR L-18169, July 31,1964
– Gutierrez v. Collector, 14 SCRA 33
4. Losses
– Fernandez Hermanos v. CIR, 29 SCRA 552
– Plaridel Security v. CIR, 21 SCRA 1187
– China Bank v. CA, 336 SCRA 178
– The City Lumber v. Domingo, GR L-18611, Jan. 30,1964
– Marcelo Steel v. Collector, 109 Phil 921
– Phil. Sugar Estate v. Collector, 60 Phil 565
5. Bad Debts
– Phil. Refining v. CA, 256 SCRA 667
– Collector v. Goodrich, 21 SCRA 1336
6. Depreciation
– Basilan Estates v. CIR, 21 SCRA 17
– Zamora v. Collector, 8 SCRA 163
7. Depletion
– Consolidated Mines v. CTA, 58 SCRA 618
8. R&D Expenses
9. Charitable and Other Contributions
– Roxas v. CTA, 23 SCRA 276
10. Contribution to a Pension Trust
C. Non-Deductible Expenses
– Collector v.Jamir, 4 SCRA 716
– Adas Consolidated v. CIR, GR L-26911, Jan. 27,1981
– Gancayco v. Collector, 1 SCRA 980
1. Losses between Related Taxpayers
2. Losses on Wash Sales
3. Illegal Expenses
– Callanocv. Collector, 3 SCRA 517
– 3M Philippines v. CIR, GR 82833, Sept. 26,1988
D. Special Deductions
E. Deductions for Individuals
1. Optional Standard Deductions
2. Premium Payments
F. Personal Exemptions
- Collector v. Calsado, GR L-10293, Feb. 27,1959
- Resaba v. Republic, GR L-6294, June 28,1954
1. Basic Personal Exemption
2. Additional Exemption for Dependents

VI. Tax on Individuals: Bases and Rates


A. Resident Gtizens and Resident Aliens
1. Taxable Income
2. Passive Income:
3. InteOrest, Royalties, Prizes and Other Winnings
4. Dividends
5. Capital Gains on Shares of Stocks
6. Capital Gains on Real Property
B. Non-Resident Aliens Engaged in Trade or Business
1. Taxable Income
2. Passive Income
3. Capital Gains
C. Non-Resident Aliens Not Engaged in Trade or Business
D. Special Aliens
E. Members of GPP

VII. Tax on Corporations: Bases and Rates


A. Domestic Corporations
1. Taxable Income
2. Passive Income:
3. Interest, Royalties
4. Dividends
5. Capital Gains
B. Resident Foreign Corporations
1. Taxable Income
2. Branch Profit Remittance Tax
- Bank of America v. CIR, GR 10392, July 21,1994,234 SCRA 302
- Marubeni v. CIR, 177 SCRA 500
- Campania General de Tabacos, CTA 4451, Aug 23,1993
3. Passive Income:
4. Interest
5. Dividends
6. Capital Gains
C. Non-resident Foreign Corporations
1. Taxable Income
2. Passive Income:
3. Interest
4. Dividends
- CIR v. Procter and Gamble, 160 SCRA 650; 204 SCRA 377
- CIR v. Wander Philippines, 160 SCRA 573
- Marubeni v. Commissioner, 177 SCRA 500
5. Capital Gains
D. Special Corporations
1. Private Educational Institutions and Non-profit Hospitals
2. Non-profit-non-stock Educational Institution
3. Non-resident Cinematographic Film Owner, Lessor or Distributor International
Carriers
- BOAC v. CIR, GR L-65773-4, April 30,1987
4. Non-resident Owner of Vessels
5. Non-resident Lessor of Aircraft, Machineries and Other Equipment
6. Foreign Currency Deposit Units/Offshore Banking Units
7. Regional or Area Headquarters and Regional Operating Headquarters
8. Petroleum Service Contractor and Subcontractor
- Zapata Marine Services v. CTA, GR 80046, Apr. 18,1988
9. BCD A, PEZA and BOI Registered Enterprises
E. Minimum Corporate Income Tax
F. Improperly Accumulated Earnings Tax
- Cyanamid Phils, v. CA, GR 1008067, Jan. 20,2000
- CIR v. Antonio Tuason, GR 85749, May 15,1989
- Manila Wine Merchants v. CIR, GR L-26145, Feb. 25,1984
G. Fringe Benefits Tax; De Minimis Benefits; ACA; RATA; PERA

VIII. Ordinary Assets and Capital assets


A. Capital Asset v. Ordinary Asset
- Tuazon vs. Lingad, 58 SCRA 170
- Calasanz vs. CIR, G.R. No. L-26284, Oct. 9,1986
- Ferrer vs. Collector, 5 SCRA 1022
- Roxas vs. CIR, G.R. No. L-25043, Apr. 26,1968
B. Treatment of Sale or Exchange of Ordinary Assets
C. Treatment of Sale or Exchange of Capital Assets which are not Real Property
D. Treatment of Sale or Exchange of Capital Assets which are Real Property
E. Foreclosure Sales of Real Property

IX. Tax-Free Exchanges and Other Tax-Exempt Transactions


A. In General
B. Merger or Consolidation
- CIR vs. Rufino, 148 SCRA 42
- BIR Ruling No. 383-87, Nov. 25,1987
C. Exchange of Property for Shares of Stock
- Liddell & Co., Inc. vs. Collector, 2 SCRA 632
D. Other Tax-Exempt Transactions
1. Sale of Principal Residence
2. Community Mortgage Program
3. Socialized Housing
4. Deeds of Trusts
5. Transfers by Mistakes
6. Transfers of Rights
7. Rescinded Contracts
8. Equitable Mortgage
9. Condominium Corporations
10. Miscellaneous Exempt Transactions
E. Administrative Requirements

X. Accounting Periods and Methods


A. Calendar Year v. Fiscal Year
B. Recognition of Income
1. Long Term Contracts
2. Installment Sales
3. Termination of Leasehold
- Consolidated Mines v. CTA, GR L-18844, Aug. 29,1974
- Perez v. CTA, GR L-10507, May 30,1958
- Collector v. Reyes, GR L-11534, Nov. 25,1958
- Filipinas Synthetic v.CA, 316 SCRA 480
C. Recording of Income and Expenses/ Keeping of Books
- CLR v. Wyeth Suaco, 202 SCRA 135
- Consolidated Mines v. CTA, 58 SCRA 618

XI. Withholding of Taxes


- OR v. Procter and Gamble, GR 66838, Dec. 2,1991
- CIR v. Wander Philippines, GR L-68375, Apr. 15,1988
- Filsyn v. CA, GR 118498, Oct. 12,1999
- QR v. Procter and Gamble, 204 SCRA 377
- Marubeni v. QR, 177 SCRA 501
- QR v. CA, GR 127105, June 25,1999 and Aug. 30,1999
- Republic v. Lim Tian, 16 SCRA 584

XII. Returns and Payment of Taxes


A. In General
- Garrison v. CA, 187 SCRA 525
B. Individuals
C. Corporations
- CIR v. TMX Sales, 205 SCRA 18
- ACCRA Investment v. CA, 204 SCRA 957
- San Carlos Milling v. CIR, 228 SCRA 135