Professional Documents
Culture Documents
FACTS:
BIR investigated the income tax liability of FACTS:
Anastacio Pineda’s estate for the years The BIR assessed Algue a total amount of
1945, 1946, 1947, and 1948 and it found delinquency taxes of Php 83,183.85 for the
that the corresponding income tax return years 1958 and 1959. It contends that the
were not filed. This resulted to a P760.28 company's claimed deduction of Php 75,000
deficiency income tax for 1945 and 1946 in the form of promotional fees is disallowed
and real estate dealer’s fixed tax for the because it was not ordinary reasonable or
4th quarter of 1946 and for the whole year necessary business expenses. Algue filed a
1947. Manuel Pineda, eldest son of protest.
Anastacio, received the assessment. He
contested the same alleging that only a BIR did not take any action. So, Algue filed
proportionate part should be his liability. a petition for review with the Court of Tax
CTA ruled that Pineda is liable only for Appeals which rule in favor of Algue. Thus,
taxes corresponding to his share in the the current petition.
estate. Hence, the present petition.
ISSUE:
ISSUE: Whether the BIR correctly disallowed the
Whether the Government can require deduction
Manuel Pineda to pay the full amount of the
tax assessed RULING:
No.
RULING:
Yes. As a holder of property belonging to The burden is on the taxpayer to prove the
the estate, Pineda is liable for the tax up to validity of the claimed deduction. Here, the
the amount of the property in his onus has been discharged satisfactorily.
possession. The BIR is given the discretion Here, the onus has been discharged
to avail of the most expeditious way to satisfactorily. The promotional fees were
collect the tax. This is, of course, without necessary and reasonable in the light of the
prejudice to Pineda’s right of contribution for efforts exerted by the payees in the
his co-heirs. Put simply, the Supreme Court inducement of investors to venture in an
held that the rule on solidarity applies to experimental enterprise. Thus, the payees
taxes because it is not an ordinary contract. should be sufficiently recompensed.
Two persons liable for payment of estate
tax:
Francia v Intermediate Appellate Court
(1988)
1. Executor or administrator;
2. Heirs up to the extent of their
inheritance. Francia v Intermediate Appellate Court GR
No L-67649, June 28, 1988
FACTS:
Engracio Francia was the registered owner
of a house and lot located in Pasay City. A
portion of such property was
expropriated by the Republic of the
Philippines in 1977. It appeared that Francia
did not pay his real estate taxes from 1963 Progressive Development Corporation v.
to 1977. Thus, his property was sold in a Quezon City
public auction by the City Treasurer of
Pasay City. Francia filed a complaint to Facts:
annual the auction sale. The lower court The City Council of QC passed an
dismissed the complaint and the ordinance known as the Market Code of
Intermediate Appellate Court affirmed the QC, which imposed a 5% supervision fee on
decision of the lower court in toto. Hence, gross receipts on rentals or lease of
this petition for review. Francia contends privately-owned market spaces in QC. In
that his tax delinquency of P 2,400 has case of failure of the owners of the market
been extinguished by legal compensation. spaces to pay the tax for three consecutive
He claims that the government owed him P months, the City shall revoke the permit of
4,116 when a portion of his land was the privately-owned market to operate.
expropriated on October 15, 1977. Progressive Development Corp, owner and
operator of Farmer’s Market, filed a petition
ISSUE: for prohibition against QC on the ground
May the expropriation payment compensate that the tax imposed by the Market Code
for the real estate taxes due? was in reality a tax on income, which the
municipal corporation was prohibited by law
RULING: to impose.
No. There can be no offsetting of taxes Issue:
against the claims that the taxpayer may Whether or not the supervision fee is an
have against the government. A person income tax or a license fee
cannot refuse to pay a tax on the ground Held:
that the government owes him an amount It is a license fee. A LICENSE FEE is
equal to or greater than the tax being imposed in the exercise of the police power
collected. The collection of a tax cannot primarily for purposes of regulation, while
await the results of a lawsuit against the TAX is imposed under the taxing power
government. Internal revenue taxes cannot primarily for purposes of raising revenues. If
be the subject of compensation. The the generating of revenue is the primary
Government and the taxpayer are not purpose and regulation is merely incidental,
mutually creditors and debtors of each other the imposition is a tax; but if regulation is
under Article 1278 of the Civil Code and a the primary purpose, the fact that
claim of taxes is not such a debt, demand, incidentally, revenue is also obtained does
contract or judgment as is allowed to be set- not make the imposition a tax. To be
off. considered a license fee, the imposition
must relate to an occupation or activity that
Moreover, the amount of P4,116 paid by the so engages the public interest in health,
national government for the 125 square morals, safety, and development as to
meter portion of his lot was deposited with require regulation for the protection and
the Philippine National Bank long before the promotion of such public interest; the
sale at public auction of his remaining imposition must also bear a reasonable
property. It would have been an easy matter relation to the probable expenses of
to withdraw P 2,400 from the deposit so that regulation, taking into account not only the
he could pay the tax obligation thus aborting costs of direct regulation but also its
the sale at public auction. Thus, the petition incidental consequences. In this case, the
for review is dismissed. The taxes assessed Farmers’ Market is a privately-owned
are the obligations of the taxpayer arising market established for the rendition of
from law, while the money judgment against service to the general public. It warrants
the government is an obligation arising from close supervision and control by the City for
contract, whether express or implied. the protection of the health of the public by
insuring the maintenance of sanitary for the payment of the cost of public
conditions, prevention of fraud upon the improvements in its immediate vicinity and
buying public, etc. Since the purpose of the levied with reference to special benefits to
ordinance is primarily regulation and not the property assessed.
revenue generation, the tax is a license fee. A special assessment is not, strictly
The use of the gross amount of stall rentals speaking, a tax; and neither the decree nor
as basis for determining the collectible the Constitution exempt the Apostolic
amount of license tax does not, by itself, Prefect from payment of said special
convert the license tax into a prohibited tax assessment.
on income. Such basis actually has a
reasonable relationship to the probable Furthermore, arguendo that exemption may
costs of regulation and supervision encompass such assessment, the Apostolic
of Progressive’s kind of business, since Prefect cannot claim exemption as it has not
ordinarily, the higher the amount of rentals, proven the property in question is used
the higher the volume of items sold. The exclusively for religious purposes; but that it
higher the volume of goods sold, the greater appears that the same is being used to
the extent and frequency of supervision and other non-religious purposes.
inspection may be required in the interest of
the buying public. Thus, the Apostolic Prefect is required to
pay the special assessment.
Apostolic Prefect of Mountain Province v
City Treasurer of Baguio City (1941) RENATO V. DIAZ AND AURORA MA. F.
TIMBOL vs. THE SECRETARY OF
Apostolic Prefect of Mountain Province v FINANCE and THE COMMISSIONER OF
City Treasurer of Baguio City GR No 47252, INTERNAL REVENUE
April 18, 1941
Facts:
FACTS: Petitioners Renato Diaz and Aurora Ma. F.
The Apostolic Prefect is a corporation sole, Timbol filed a petition for declaratory relief
of religious character, organized under the assailing the validity of the impending
Philippine laws, and with residence imposition of value-added tax (VAT) by the
in Baguio. The City imposed a special Bureau of Internal Revenue (BIR) on the
assessment against properties within its collections of tollway operators. They
territorial jurisdiction, including those of the alleged that the Congress when it enacted
Apostolic Prefect, which benefits from its the NIRC did not intend to include toll fees
drainage and sewerage system. The within the meaning of "sale of services" that
Apostolic Prefect contends that its are subject to VAT; that a toll fee is a "users
properties should be free from tax. tax," not a sale of services; that to impose
VAT on toll fees would amount to a tax on
ISSUE: public service; and that, since VAT was
Is the Apostolic Prefect exempt from never factored into the formula for
paying? computing toll fees, its imposition would
violate the non-impairment clause of the
RULING: constitution. The government averred that
No, it is liable. the NIRC imposes VAT on all kinds of
services of franchise grantees, including
In its broad meaning, tax includes both tollway operations, except where the law
general taxes and special assessment. Yet provides otherwise; that the Court should
actually, there is a recognized distinction seek the meaning and intent of the law from
between them in that assessment is the words used in the statute; and that the
confined to local impositions upon property imposition of VAT on tollway operations has
been the subject as early as 2003 of several for which will be advanced by NIA. Hydro
BIR rulings and circulars. shall repay NIA the costs incurred and the
manner of repayment shall be through
Issue: Whether or not toll fees collected by deductions from each monthly payment due
tollway operators may be subjected to to Hydro. Hydro shall repay NIA the full
value- added tax. value of the construction before the
eventual transfer of ownership.
Ruling: Upon transfer, Hydro was assessed an
Yes. If the legislative intent was to exempt additional 3% ad valorem duty which it paid
tollway operations from VAT, as petitioners under protest. The Collector of Customs
so strongly allege, then it would have been then ordered for the refund of the ad
well for the law to clearly say so. Tax valorem duty in the form of tax credit. This
exemptions must be justified by clear was then reversed by the Deputy Minister of
statutory grant and based on language in Finance.
the law too plain to be mistaken. The
operation by the government of a tollway Issue:
does not change the character of the road Whether or not the imposition of the 3% ad
as one for public use. Someone must pay valorem tax on importations is valid.
for the maintenance of the road, either the
public indirectly through the taxes they pay Held:
the government, or only those among the No. EO 860 which was the basis for the
public who actually use the road through the imposition of the ad valorem duty took effect
toll fees they pay upon using the road. The December 1982. The importations were
tollway system is even a more efficient and effected in 1978 and 1979 by NIA. It is a
equitable manner of taxing the public for the cardinal rule that laws shall have no
maintenance of public roads. The charging retroactive effect unless contrary is
of fees to the public does not determine the provided. EO 860 does not provide for its
character of the property whether it is for retroactivity. The Deputy Minister of Finance
public dominion or not. Article 420 of the even clarified that letters of credit opened
Civil Code defines property of public prior to the effectivity of EO 860 are not
dominion as "one intended for public use." subject to its provisions.
Even if the government collects toll fees, the In the case, the procurement of the
road is still "intended for public use" if equipment was not on a tax exempt basis
anyone can use the road under the same as the import liabilities have been secured
terms and conditions as the rest of the to paid under a financial scheme. It is a
public. The charging of fees, the limitation matter of implementing a pre-existing
on the kind of vehicles that can use the agreement, hence, the imported articles can
road, the speed restrictions and other only be subject to the rates of import duties
conditions for the use of the road do not prevailing at the time of entry or withdrawal
affect the public character of the road. from the customs’ custody.
Facts: Facts:
National Irrigation Administration (NIA) Ayala Securities Corp. (Ayala) failed to file
entered into an agreement with Hydro returns of their accumulated surplus so
Resources for the construction of the Magat Ayala was charged with 25% surtax by the
River Multipurpose Project in Isabela. Under Commissioner of internal Revenue. The
their contract, Hydro was allowed to procure CTA (Court of Tax Appeals) reversed the
new construction equipment, the payment Commissioner’s decision and held that the
assessment made against Ayala was RULING:
beyond the 5-yr prescriptive period as No. The Court has ruled the tenement
provided in section 331 of the National houses constitute a distinct class of property
Internal Revenue Code. Commissioner now and that taxes are uniform and equal when
files a motion for reconsideration of this imposed upon all property of the same class
decision. Ayala invokes the defense of or character within the taxing authority.
prescription against the right of the The fact that the owners of the other
Commissioner to assess the surtax. classes of buildings in Iloilo are not imposed
upon by the ordinance, or that tenement
Issue: taxes are imposed in other cities do not
Whether or not the right to assess and violate the rule of equality and uniformity.
collect the 25% surtax has prescribed after The rule does not require that taxes for the
five years. same purpose should be imposed in
different territorial subdivisions at the same
Held: time. So long as the burden of tax falls
No. There is no such time limit on the right equally and impartially on all owners or
of the Commissioner to assess the 25% operators of tenement houses similarly
surtax since there is no express statutory classified or situated, equality and uniformity
provision limiting such right or providing for is accomplished. The presumption that tax
its prescription. Hence, the collection of statutes are intended to operate uniformly
surtax is imprescriptible. The underlying and equally was not overthrown therein.
purpose of the surtax is to avoid a situation
where the corporation unduly retains its
surplus earnings instead of declaring and CITY OF MANILA vs. COCA-COLA
paying dividends to its shareholders. SC BOTTLERS PHILIPPINES, INC.- CTA,
reverses the ruling of the CTA. Double Taxation
2. Whether or not petitioner is exempted The respondent St. Luke’s Medical Center,
from real property taxes. Inc. (SLMC) received a tax payment
assessment from the Large Taxpayers
RULING: Service-Documents Processing and Quality
1. Yes. The Court hold that the petitioner is Assurance Division of the Bureau of Internal
a charitable institution within the context of Revenue Audit Result/Assessment Notice
on December 14, 2007. Based on the income tax under Section 27 (B) of the 1997
assessment the respondent SLMC has a NIRC, and liable to pay the compromise
deficiency income tax under Section 27 (B) penalty. SLMC argues that the income
of the 1997 National Internal Revenue Code derives from operating a hospital is not
(NIRC), as amended for the taxable year income from activities conducted for profit.
2005 in the amount of P78, 617,434.54 and And the case should be dismissed since
for taxable year 2006 in the amount of P57, payment to BIR for the basic taxes due for
119,867.33. taxable years 1998, 2000-2002 and 2004-
2007 has been made.
In response to the received assessment
from NIRC on January 14, 2008, SLMC filed
with the petitioner Commission on Internal ISSUES:
Revenue (CIR) an administrative protest
assailing the assessments. The SLMC 1. Whether or not SLMC is liable for income
alleged that they are exempted from paying tax under Section 27 (B) of the 1997 NIRC.
the income tax since SLMC is a non-stock,
non-profit, charitable and social welfare 2. Whether or not SLMC is not liable for
organization under Section 30 (E) and (G) compromise penalty.
of the 1997 NIRC as amended.
3. Whether or not the petition is rendered
However, on April 25, 2008, SLMC received moot by payment made by SLMC on April
the petitioner CIR’s Final Decision on the 30, 2013.
Disputed Assessment dated April 9, 2008
increasing the deficiency income from P78,
617, 434.54 to P82,419,522.21 for taxable HELD:
year 2005 and from P57,119,867.33 to P60,
259,885.94 for taxable year 2006. 1. Yes. Based on Section 27 (B) of the
NIRC imposes 10% preferential tax rate on
The aggrieved SLMC elevated the matter to the income of (1) proprietary non-profit
Court of Tax Appeal (CTA) finding the educational institutions and (2) proprietary
decision that SLMC is not liable for the non-profit hospitals. The only qualifications
deficiency income tax under Section 27 (B) for hospitals are they must be proprietary
of the 1997 NIRC, as amended and exempt and non-profit. Proprietary means private,
from paying the income under Section 30 following the definition of a proprietary
(E) and (G) of the same code. educational institution, as any other private
school maintained and administered by
Consequently, the CIR moved for private individuals or groups with
reconsideration but the CTA Division denied government permit. While non-profit means
which the CIR prompted to file a petition for no net income or asset accrues to or
review before the CTA En Banc which benefits any member or specific person with
eventually denied and affirmed the first all the net income or asset devoted to the
decision of the CTA Division. institution’s purposes and all its activities
conducted not for profit.
Moreover, the CIR filed an instant petition
contending that the CTA erred in exempting 2. Yes. Under Sections 248 and 249 of the
SLMC from payment of income tax, where 1997 NIRC the imposition of surcharges
the CIR petition is partly granted. SLMC and interests were deleted on the basis of
ordered to pay the deficiency income tax in good faith and honest belief on the part of
1998 based on the 10% preferential income SLMC that it is not subject to tax so
tax. The CIR argues that under the doctrine therefore, SLMC is not liable to pay the
of Stare Decisis SLMC is subject to 10% compromise penalty.
of their properties, real or personal, be
3. Yes. The payment of basic taxes made subject to the tax imposed by the same
by the SLMC has become moot even the Code. While the income received by the
court agrees with the CIR that the payment organizations enumerated in Section 26 of
confirmation from the BIR is not competent the NIRC is, as a rule, exempted from the
proof as presented by SLMC due to no payment of tax in respect to income
specific taxable period for payments that it received by them as such, the exemption
covers. However, the court finds sufficient does not apply to income derived from any
proof of payment based on the Certification of their properties, real or personal or from
of Payment issued by the Large Taxpayers any of their activities conducted for profit,
Service of the BIR since CIR never question regardless of the disposition made of such
for its documents authenticity. The court income.
dismissed the petition and lowered the basic
taxes for taxable year 2005 and 2006, in the Tolentino vs. Secretary of Finance
amounts of P49, 919,496.40 and P41, G.R. No. 115455
525,608.40. 235 SCRA 630 (1994)
FACTS
CIR v CA & YMCA (1998) RA 7716, otherwise known as the
Digest #1 Expanded Value-Added Tax Law, is an act
that seeks to widen the tax base of the
CIR v CA & YMCA existing VAT system and enhance its
GR No 124043, October 14, 1998 administration by amending the National
Internal Revenue Code. There are various
FACTS: suits questioning and challenging the
In 1980, YMCA earned an income of constitutionality of RA 7716 on various
676,829.80 from leasing out a portion of its grounds.
premises to small shop owners, like Tolentino contends that RA 7716 did not
restaurants and canteen operators and originate exclusively from the House of
44,259 from parking fees collected from Representatives but is a mere consolidation
non-members. On July 2, 1984, the CIR of HB. No. 11197 and SB. No. 1630 and it
issued an assessment to YMCA for did not pass three readings on separate
deficiency taxes which included the income days on the Senate thus violating Article VI,
from lease of YMCA’s real property. YMCA Sections 24 and 26(2) of the Constitution,
formally protested the assessment but the respectively.
CIR denied the claims of YMCA. On appeal, Art. VI, Section 24: All appropriation,
the CTA ruled in favor of YMCA and revenue or tariff bills, bills authorizing
excluded income from lease to small shop increase of the public debt, bills of local
owners and parking fees. However, the CA application, and private bills shall originate
reversed the CTA but affirmed the CTA exclusively in the House of Representatives,
upon motion for reconsideration. but the Senate may propose or concur with
amendments.
ISSUE: Art. VI, Section 26(2): No bill passed by
Whether the rental income of YMCA is either House shall become a law unless it
taxable has passed three readings on separate
days, and printed copies thereof in its final
RULING: form have been distributed to its Members
Yes. The exemption claimed by YMCA is three days before its passage, except when
expressly disallowed by the very wording of the President certifies to the necessity of its
then Section 27 of the NIRC which immediate enactment to meet a public
mandates that the income of exempt calamity or emergency. Upon the last
organizations (such as the YMCA) from any reading of a bill, no amendment thereto
shall be allowed, and the vote thereon shall military bases into hubs of business activity
be taken immediately thereafter, and the or investment.
yeas and nays entered in the Journal.
ISSUE Issue:
Whether or not RA 7716 violated Art. VI,
Section 24 and Art. VI, Section 26(2) of the WON Proclamation No. 420 is constitutional
Constitution. by providing for national and local tax exem
HELD ption within and granting other economic inc
No. The phrase “originate exclusively” refers entives to the John Hay SEZ
to the revenue bill and not to the revenue
law. It is sufficient that the House of NO!
Representatives initiated the passage of the Nowhere in RA 7227 is there a grant of tax
bill which may undergo extensive changes exemption to SEZs yet to be established in
in the Senate. base areas, unlike the grant under Section 1
SB. No. 1630, having been certified as 2 which provides for tax exemption to the es
urgent by the President need not meet the tablished Subic SEZ. The tax exemption gra
requirement not only of printing but also of nt to John Hay SEZ contravenes Article VI,
reading the bill on separate days. Section 28 (4) of the 1987 Constitution whic
h provides that “No law granting any tax exe
mption shall be passed without the concurre
nce of a majority of all the members of Cong
[G. R. No. 119775. October 24, 2003] ress.
JOHN HAY PEOPLES
ALTERNATIVE COALITION Furthermore, it is the Legislature, unless limi
Facts: ted by a provision of the state constitution,
R.A. No. 7227 likewise created and grantedt which has the full power to exempt any pers
he Subic SEZ incentives ranging from tax a on or corporation or class of property from t
nd duty- axation, its power to exempt being as broad
free importations, exemption of businesses t as its power to tax. The grant by Proclamati
herein from local and national taxes, to othe on No. 420 of tax exemption and other privil
r hallmarks of a liberalized financial and busi eges to the John Hay SEZ is VOID for being
ness climate. violative of the Constitution.
And R.A. No. 7227 expressly gave authority
to the President to create through executive
proclamation, subject to the concurrence of BPI LEASING CORP. vs. CA, et al.
the local government units directly affected, GR No. 127624, 18 Nov. 2003
other Special Economic Zones (SEZ) in the FACTS:
areas covered respectively by the Clark mili BLC is a corporation engaged in the
tary reservation, the Wallace Air Station in S business of leasing properties. For the
an Fernando, La Union, and Camp John Ha calendar year 1986, it paid Commissioner of
y. Internal Revenue a total of P1,139,041.49 r
On July 5, 1994 then President Ramos issu epresenting 4% contractor’s percentage tax
ed Proclamation No. 420 which established as imposed by the National Internal
a SEZ on a portion of Camp John Hay. Revenue Code. However, in November
In maintaining the validity of Proclamation N 1986, CIR issued a Revenue Regulation
o. 420, respondents contend that by extendi which provides that companies registered
ng to the John Hay SEZ economic incentive under RA 5980, like BLC, are no longer
s similar to those enjoyed by the Subic SEZ liable for contractor’s percentage tax,
which was established under R.A. No. 7227, instead, subject only to gross
the proclamation is merely implementing th receipts tax. Thereafter, BLC filed a claim
e legislative intent of said law to turn the US for refund before the CIR and
simultaneously filed a petition for review 88 stating that Philhealth, as a provider of
before the Court of Tax Appeal in order to medical services, is exempt from the VAT
stop the running of the prescriptive period coverage. When RA 8424 or the new Tax
for refunds. Both cases were denied, Code was implemented it adopted the
despite motion for reconsideration by provisions of VAT and E-VAT. On 1999, the
BLC, hence, they appealed before the Court BIR sent Philhealth an assessment notice
of Appeals, which the latter affirmed the for deficiency VAT and documentary stamp
decision of CTA and CIR. Aggrieved by the taxes for taxable years 1996 and
decision, BLC instituted a petition before the 1997. After CIR did not act on it, Philhealth
SC. However, the certification against non- filed a petition for review with the CTA. The
forum shopping attached to the petition was CTA withdrew the VAT assessment. The
signed by the counsel on record of the BLC, CIR then filed an appeal with the CA which
who was not specifically authorized to was denied.
do so. ISSUES:
ISSUE: 1. Whether Philhealth is subject to
Whether or not a lawyer is authorized to VAT.
validly sign, for and in behalf of its client, the 2. Whether VAT Ruling No. 231-88
certification of non-forum shopping. exempting Philhealth from payment
HELD: of VAT has retroactive application.
It was held that while the certification of RULING:
non-forum shopping may be signed,for
an on behalf of a corporation, by a specifical YES. Section 103 of the NIRC exempts
ly authorized lawyer who has personal taxpayers engaged in the performance of
knowledge of the facts required to be medical, dental, hospital, and veterinary
disclosed in such document, it doesnot services from VAT. But, in Philhealth's letter
mean that any lawyer, acting on behalf of requesting of its VAT-exempt status, it was
the corporation he is held that it showed Philhealth provides
representing,may routinely sign a certificatio medical service only between their
n of non- members and their accredited hospitals,
forum shopping – the lawyer must be“specifi that it only provides for the provision of pre-
cally authorized” in order to validly sign the need health care services, it contracts the
certification. Since powers of corporations services of medical practitioners and
are exercised through their board of establishments for their members in the
directors delivery of health services.
and/or duly authorized officers and agents, Thus, Philhealth does not fall under the
physical acts, like the signing of documents, exemptions provided in Section 103, but
can be performed only by natural persons d merely arranges for such, making Philhealth
uly authorized for thepurpose by corporate not VAT-exempt. YES. Generally, the NIRC
by laws or by specific acts of the board of has no retroactive application except when:
directors. Being 1. where the taxpayer deliberately
counsel of record does not vest upon a lawy misstates or omits material facts
er the authority to execute the certification from his return or in any document
on behalf of his client. PETITION DENIED. required of him by the Bureau of
Internal Revenue;
COMMISSIONER OF INTERNAL 2. where the facts subsequently
REVENUE v. PHILIPPINE HEALTH CARE gathered by the Bureau of Internal
PROVIDERS, INC. G.R. No. 168129. April Revenue are materially different
24, 2007 from the facts on which the ruling is
FACTS: based, or
3. where the taxpayer acted in bad
On 1987, CIR issued VAT Ruling No. 231- faith.
prescriptive period per Section 230 of the
The Court held that Philhealth acted in good 1977 NIRC is 2 years and must be followed
faith. The term health maintenance notwithstanding the RMC 7-85 which
organization was first recorded in the changed the prescriptive period of 2 years
Philippine statute books in 1995. It is to 10 years. Such clear inconsistency
apparent that when VAT Ruling No. 231-88 legislated guidelines contrary to the statute
was issued in Philhealth's favor, the term passed by Congress.
health maintenance organization was
unknown and had no significance for Philippine Health Care Providers v CIR
taxation purposes. Philhealth, therefore, G.R. No. 167330 June 12, 2008
believed in good faith that it was VAT
exempt for the taxable years 1996 and 1997 Facts:
on the basis of VAT Ruling No. 231-88. The The petitioner, a prepaid health-care
rule is that the BIR rulings have no organization offering benefits to its
retroactive effect where a grossly unfair deal members. The CIR found that the
would result to the prejudice of the taxpayer. organization had a deficiency in the
payment of the DST under Section 185 of
PBCom v CIR the 1997 Tax Code which stipulated its
GR No 112024, January 28, 1999 implementation:
“On all policies of insurance or bonds or
FACTS: obligations of the nature of indemnity for
PBCom filed its quarterly income tax returns loss, damage, or liability made or renewed
for the first and second quarters of 1985, by any person, association or company or
reported profits and paid the total income corporation transacting the business of
tax of P5,016,954. But, PBCom suffered net accident, fidelity, employer's liability, plate,
losses at the end of the year 1985 in the glass, steam boiler, burglar, elevator,
amount of P25,317,288 and P14,129,602 at automatic sprinkler, or other branch of
the end of 1986. But during these two years, insurance (except life, marine, inland, and
PBCom earned rental income from leased fire insurance)”
properties. The lessees withheld and The CIR sent a demand for the payment
remitted to the BIR withholding creditable of deficiency taxes, including surcharges
taxes in 1985 and 1986. On August 7, 1987, and interest, for 1996-1997 in the total
petitioner requested the CIR for a tax credit amount of P224,702,641.18.
of P5,016,954 representing overpayment of The petitioner protested to the CIR, but it
taxes. Thereafter, petitioner filed claim for didn’t act on the appeal. Hence, the
refund of creditable taxes. company had to go to the CTA. The latter
declared judgment against them and
ISSUES: reduced the taxes. It ordered them to pay
1. Whether PBCom is entitled to the tax 22 million pesos for deficiency VAT for 1997
refund 2. Whether the action has and 31 million deficiency VAT for 1996.
prescribed CA denied the company’s appeal an d
increased taxes to 55 and 68 million for
RULING: 1996 to 1997.
1. No. The corporation must signify in its
annual corporate adjustment return its Issues: WON a health care agreement in
intention whether to request for a refund or the nature of an insurance contract and
claim for an automatic tax credit for the therefore subject to the documentary stamp
succeeding taxable year. That the petitioner tax (DST) imposed under Section 185 of
opted for an automatic tax credit, his choice Republic Act 8424 (Tax Code of 1997)
precludes the other.
2. The action has prescribed. The Held: Yes. Petition dismissed.
THE CITY OF ILOILO vs. SMART
Ratio: COMMUNICATIONS, INC. (SMART)
The DST is levied on the exercise by THE CITY OF ILOILO vs. SMART
persons of certain privileges conferred by COMMUNICATIONS, INC. (SMART)
law for the creation, revision, or termination GR No. 167260
of specific legal relationships through February 27, 2009
the execution of specific instruments.
The DST is an excise upon the privilege, FACTS:
opportunity, or facility offered
at exchanges for the transaction of the SMART received a letter of assessment
business. In particular, the DST under dated February 12, 2002 from petitioner
Section 185 of the 1997 Tax Code is requiring it to pay deficiency local franchise
imposed on the privilege of making or and business taxes, in the amount of
renewing any policy of insurance (except P764,545.29, which it incurred for the years
life, marine, inland and fire insurance), bond 1997 to 2001. SMART protested the
or obligation in the nature of indemnity for assessment, claiming exemption from
loss, damage, or liability. payment of local franchise and business
Petitioner's health care agreement is taxes based on Section 9 of its legislative
primarily a contract of indemnity. And in the franchise under Republic Act (R.A.) No.
recent case of Blue Cross Healthcare, Inc. 7294 (SMART’s franchise). Under SMART’s
v. Olivares, this Court ruled that a health franchise, it was required to pay a franchise
care agreement is in the nature of a non-life tax equivalent to 3% of all gross receipts,
insurance policy. which amount shall be in lieu of all taxes.
Its health care agreement is not a contract SMART contends that the “in lieu of all
for the provision of medical services. taxes” clause covers local franchise and
Petitioner does not actually provide medical business taxes. SMART similarly invoked
or hospital services but merely arranges for R.A. No. 7925 or the Public
the same Telecommunications Policy Act (Public
It is also incorrect to say that the health care Telecoms Act) whose Section 23 declares
agreement is not based on loss or damage that any existing privilege, incentive,
because, under the said agreement, advantage, or exemption granted under
petitioner assumes the liability and existing franchises shall ipso facto become
indemnifies its member for hospital, medical part of previously granted-
and related expenses (such as professional telecommunications franchise. SMART
fees of physicians). The term "loss or contends that by virtue of Section 23, tax
damage" is broad enough to cover the exemptions granted by the legislature to
monetary expense or liability a member will other holders of telecommunications
incur in case of illness or injury. franchise may be extended to and availed of
Philamcare Health Systems, Inc. v. CA.- by SMART.
The health care agreement was in the
nature of non-life insurance, which is The petitioner posits that SMART’s claim for
primarily a contract of indemnity. exemption under its franchise is not
Similarly, the insurable interest of every equivocal enough to prevail over the
member of petitioner's health care program specific grant of power to local government
in obtaining the health care agreement is his units to exact taxes from businesses
own health. Under the agreement, petitioner operating within its territorial jurisdiction
is bound to indemnify any member who under Section 137 in relation to Section 151
incurs hospital, medical or any of the LGC. More importantly, it claimed that
other expense arising from sickness, injury exemptions from taxation have already
or other stipulated contingency to the extent been removed by Section 193 of the LGC,
agreed upon under the contract. which provides that tax exemptions or
incentives granted to, or presently enjoyed exemption to SMART covering exemption
by all persons, whether natural or juridical, from both national and local taxes:
including government-owned or controlled
corporations, except local water districts, R.A. No 7294 does not expressly provide
cooperatives duly registered under RA No. what kind of taxes SMART is exempted
6938, non-stock and non-profit hospitals from. It is not clear whether the “in lieu of all
and educational institutions, are hereby taxes” provision in the franchise of SMART
withdrawn upon the effectivity of this Code. would include exemption from local or
national taxation. What is clear is that
SMART shall pay franchise tax equivalent to
ISSUE: whether or not SMART is exempt three percent (3%) of all gross receipts of
from the payment of local franchise and the business transacted under its franchise.
business taxes under Section 9 of its But whether the franchise tax exemption
franchise and Section 23 of the Public would include exemption from exactions by
Telecoms Act. both the local and the national government
is not unequivocal.