G.R. Nos. 147706-07 | February 16, 2005 | PEOPLE OF THE PHILIPPINES, petitioner, vs.

THE HONORABLE SANDIGANBAYAN (Fifth Division) and EFREN L. ALAS, respondents | J. Corona FACTS: Two separate informations for violation of Section 3(e) of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, were filed with the Sandiganbayan on November 17, 1999 against Efren L. Alas. The charges emanated from the alleged anomalous advertising contracts entered into by Alas, in his capacity as President and Chief Operating Officer of the Philippine Postal Savings Bank (PPSB), with Bagong Buhay Publishing Company which purportedly caused damage and prejudice to the government. On October 30, 2002, Alas filed a motion to quash the informations for lack of jurisdiction, which motion was vehemently opposed by the prosecution. After considering the arguments of both parties, the respondent court ruled that PPSB was a private corporation and that its officers, particularly herein respondent Alas, did not fall under Sandiganbayan jurisdiction.

sector in the countryside xxx and to facilitate postal service by receiving collections and making payments, including postal money orders. It is a basic principle of statutory construction that when the law does not distinguish, we should not distinguish Constitution: The Batasang Pambansa shall create a special court, to be known as Sandiganbayan, which shall have jurisdiction over criminal and civil cases involving graft and corrupt practices and such other offense committed by public officers and employees, including those in government-owned or controlled corporations, in relation to their office as may be determined by law.

Sandiganbayan has jurisdiction only over public officers unless private persons are charged with them in the commission of the offenses. The records disclosed that while Philippine Postal Savings Bank is a subsidiary of the Philippine Postal Corporation which is a government owned corporation, the same is not created by a special law. said entity is formed was primarily for business

G.R. No. 129130 December 9, 2005 | FAR EAST BANK AND TRUST COMPANY, Petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE,Respondents | AZCUNA, J.: FACTS: Petitioner is a domestic banking corporation duly organized and existing under and by virtue of Philippine laws. In the early part of 1992, the Cavite Development Bank [CDB], also a domestic banking corporation, was merged with Petitioner with the latter as its surviving entity [under] the merger. Petitioner being the surviving entity[, it] acquired all [the] assets of CDB.

The People, through the Office of the Special Prosecutor (OSP), filed this petition arguing, in essence, that the PPSB was a government-owned or controlled corporation as the term was defined under Section 2(13) of the Administrative Code of 1987. RA 8249 (act defining jurisdiction of sandiganbayan) did not make a distinction as to the manner of creation of the government-owned or controlled corporations for their officers to fall under its jurisdiction. ISSUE: Does the Sandiganbayan have jurisdiction over presidents, directors or trustees, or managers of government-owned or controlled corporations organized and incorporated under the Corporation Code for purposes of the provisions of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act? HELD: Petition granted. More than 99% of the authorized capital stock of PPSB belongs to the government while the rest is nominally held by its incorporators who are/were themselves officers of PHILPOST. The creation of PPSB was expressly sanctioned by Section 32 of RA 7354, otherwise known as the Postal Service Act of 1992, for purposes of, among others, to encourage and promote the virtue of thrift and the habit of savings among the general public, especially the youth and the marginalized

CDB sold some acquired assets in the course of which it allegedly withheld the creditable tax from the sales proceeds which amounted to P755,715.00 CDB filed income tax returns which reflected that CDB incurred negative taxable income or losses for both years. Since there was no tax against which to credit or offset the taxes withheld by CDB, the result was that CDB, according to petitioner, had excess creditable withholding tax

CA held that the evidence presented by petitioner all failed to clearly establish that the taxes arising from the sale of its acquired assets sometime in 1990 and 1991 were properly withheld and remitted to the BIR. The CA likewise ruled that it was incumbent upon petitioner to present BIR Form No. 1743.1 as required under Revenue Regulation 6-85 to conclusively prove its right to the refund. It held that petitioners failure to do so was fatal to its cause. According to petitioner, CDB took the initiative of paying the tax accruing thereon notwithstanding the fact that it was the the income, to ensure that the correct taxes were remitted Petitioner further argues that the list prepared by its withholding recipient of to the BIR. Accounting

Department identifying the persons to whom the various sales were made and indicating the amount of taxes withheld for each transaction should have been given more weight by the court a quo as this document, when taken with the tax withholding forms, indubitably establishes the fact of withholding and the basis for the claims for refund. ISSUE: whether petitioner adduced sufficient evidence to prove its entitlement to a refund. HELD: The findings of fact of the CTA, a special court exercising particular expertise on the subject of tax, are generally regarded as final, binding and conclusive upon this Court, especially if these are substantially similar to the findings of the CA which is normally the final arbiter of questions of fact. The findings shall not be reviewed nor disturbed on appeal unless a party can show that these are not supported by evidence, or when the judgment is premised on a misapprehension of facts, or when the lower courts failed to notice certain relevant facts which if considered would justify a different conclusion. Petitioner has not sufficiently presented a case for the application of an exception from the rule. Reasons: - Possession of the amount that is used to settle the tax liability is acquired by the payor as the withholding agent of the government. - Tax Code imposes, among others, certain obligations upon the withholding agent to monitor its compliance with this duty - it is incumbent upon the payee to reflect in his or its own return the income upon which any creditable tax is required to be withheld at the source. Only when there is an excess of the amount of tax so withheld over the tax due on the payees return can a refund become possible. The claim that CDB had excess creditable withholding taxes can only be upheld if it were clearly and positively shown that the amounts on the various confirmation receipts were the amounts withheld by virtue of the sale of the acquired assets. On this point, the CA correctly pronounced: The confirmation receipts alone, by themselves, will not suffice to prove that the taxes reflected in the income tax returns are the same taxes withheld from CDBs income payments from the sale of its acquired assets. - As a rule, we confine our review of cases decided by the CA only to questions of law raised in the petition and therein distinctly set forth. We note that without the CDB Schedule, no evidence links the Confirmation Receipts, Payment Orders and Official Receipts to the taxes allegedly withheld by CDB on the sale of the acquired assets. - Mere allegations by petitioner of the figures in its returns are not a sufficient proof of the amount of its refund entitlement. They do not even constitute evidence adverse to respondent, against whom these are being presented.

We must emphasize that tax refunds, like tax exemptions, are construed strictly against the taxpayer and liberally in favor of the taxing authority. In the event, petitioner has not met its burden of proof in establishing the factual basis for its claim for refund and we find no reason to disturb the ruling of the lower courts.

[G.R. No. 143672. April 24, 2003] COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. GENERAL FOODS (PHILS.), INC., respondent CORONA, J.: FACTS: General Foods (Phils.), Inc., which is engaged in the manufacture of beverages such as Tang, Calumet and Kool-Aid, filed its income tax return for the fiscal year ending February 28, 1985. In said tax return, it claimed as deduction, among other business expenses, the amount of P9,461,246 for media advertising for Tang. On May 31, 1988, the Commissioner disallowed 50% or P4,730,623 of the deduction claimed by respondent corporation and was assessed deficiency income taxes. CTA denied General Foods protest, saying: With such a gargantuan expense for the advertisement of a singular product, which even excludes other advertising and promotions expenses, we are not prepared to accept that such amount is reasonable to stimulate the current sale of merchandise regardless of Petitioners explanation that such expense does not connote unreasonableness considering the grave economic situation taking place after the Aquino assassination characterized by capital fight, strong deterioration of the purchasing power of the Philippine peso and the slacking demand for consumer products (Petitioners Memorandum, CTA Records, p. 273). As held in the case of Welch vs. Helvering, efforts to establish reputation are akin to acquisition of capital assets and, therefore, expenses related thereto are not business expenses but capital expenditures. (Atlas Mining and Development Corp. vs. Commissioner of Internal Revenue, supra). For sure such expenditure was meant not only to generate present sales but more for future and prospective benefits. The Court of Appeals rendered a decision reversing and setting aside the decision of the Court of Tax Appeals: Since it has not been sufficiently established that the item it claimed as a deduction is excessive, the same should be allowed. ISSUE: whether or not the subject media advertising expense for Tang incurred by respondent corporation was an ordinary and necessary expense fully deductible under the National Internal Revenue Code (NIRC). HELD: No, it is not necessary and ordinary. To be deductible from gross income, the subject advertising expense must comply with the following requisites: (a) the expense must be ordinary and

necessary; (b) it must have been paid or incurred during the taxable year; (c) it must have been paid or incurred in carrying on the trade or business of the taxpayer; and (d) it must be supported by receipts, records or other pertinent papers. The parties are in agreement that the subject advertising expense was paid or incurred within the corresponding taxable year and was incurred in carrying on a trade or business. Hence, it was necessary. To be deductible, an advertising expense should not only be necessary but also ordinary. These two requirements must be met. The Court agreed with the Commissioner that the subject advertising expense was not ordinary on the ground that it failed the two conditions set by U.S. jurisprudence: first, reasonableness of the amount incurred and second, the amount incurred must not be a capital outlay to create goodwill for the product and/or private respondents business. Otherwise, the expense must be considered a capital expenditure to be spread out over a reasonable time. There is yet to be a clear-cut criteria or fixed test for determining the reasonableness of an advertising expense. There being no hard and fast rule on the matter, the right to a deduction depends on a number of factors such as but not limited to: the type and size of business in which the taxpayer is engaged; the volume and amount of its net earnings; the nature of the expenditure itself; the intention of the taxpayer and the general economic conditions. Therefore, even if it is necessary, it cannot be considered an ordinary expense deductible under then Section 29 (a) (1) (A) of the NIRC.Advertising is generally of two kinds: (1) advertising to stimulate the current sale of merchandise or use of services and (2) advertising designed to stimulate the future sale of merchandise or use of services. The second type involves expenditures incurred, in whole or in part, to create or maintain some form of goodwill for the taxpayers trade or business or for the industry or profession of which the taxpayer is a member. If the expenditures are for the advertising of the first kind, then, except as to the question of the reasonableness of amount, there is no doubt such expenditures are deductible as business expenses. If, however, the expenditures are for advertising of the second kind, then normally they should be spread out over a reasonable period of time. We agree with the Court of Tax Appeals that the subject advertising expense was of the second kind. Respondent admitted that the same was incurred to protect brand franchise, which is analogous to maintaining goodwill or title to ones property, a capital expenditure. Accordingly, we find that the Court of Appeals committed reversible error when it declared the subject media advertising expense to be deductible as an ordinary and necessary expense on the ground that it has not been established that the item being claimed as deduction is excessive. It is not incumbent upon the taxing authority to prove that the amount of items being claimed is unreasonable. The burden of proof to establish the validity of claimed deductions is on the taxpayer. In the present case, that burden was not discharged satisfactorily. WHEREFORE, premises considered, the instant petition is GRANTED. The assailed decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Pursuant to Sections 248 and 249 of the Tax Code, respondent General Foods (Phils.), Inc. is hereby ordered to pay its deficiency income tax in the amount of P2,635,141.42, plus 25% surcharge for late payment

and 20% annual interest computed from August 25, 1989, the date of the denial of its protest, until the same is fully paid.