G21 SCRA 17, Nicole Stephanie Wee, 201589812

BASILAN ESTATES, INC. v. CIR

• FACTS: Basilan Estates, Inc. claimed deductions for the depreciation of its assets on the
basis of their acquisition cost. As of January 1, 1950 it changed the depreciable value of
said assets by increasing it to conform with the increase in cost for their replacement.
Accordingly, from 1950 to 1953 it deducted from gross income the value of depreciation
computed on the reappraised value. CIR disallowed the deductions claimed by
petitioner, consequently assessing the latter of deficiency income taxes.
• Issue: Whether or not the depreciation shall be determined on the acquisition cost rather
than the reappraised value of the assets
• HELD: Yes. The income tax law does not authorize the depreciation of an asset beyond
its acquisition cost. Hence, a deduction over and above such cost cannot be claimed
and allowed. The reason is that deductions from gross income are privileges, not matters
of right. They are not created by implication but upon clear expression in the law.
 G.R. No. 85749 May 15, 1989, Nicole Stephanie Wee, 201589812

CIR VS. ANTONIO TUASON INC

• FACTS: CTA set aside petitioner’s revenue commissioner’s assessment of 1.1 M as the 25% surtax on private respondent’s
unreasonable accumulation of surplus for the year 1975-1978. Private respondent protested the assessment 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 a real estate broker. Private res. Filed a petition that pending determination of the case, an order
be issued restraining the commissioner and/or his reps from enforcing the warrants of distraint and levy. Writ of injunction
was issued by tax court. Due to the reversal of CTA of the commissioner’s decision, CIR appeals to the SC.

• ISSUES: Whether or not Tuason Inc. is liable for the 25% surtax on undue accumulation of surplus for 75-78 –

• HELD: Yes. Antionio is liable for the 25% surtax assessed. In this case, Tuason Inc, a mere holding company 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 rentals realized from the sale of realty. Tuason Inc
is also owned by Antonio himself. While these profits were actually made, the commissioner points out that the corp. did
not use up its surplus profits. Antonio claims that he spent the money to build an apartment in urdaneta but there’s a
large discrepancy bet. The market value and the alleged investment cost.The importance of liability is the purpose
behind the accumulation of the income and not the consequences of the accumulation. Thus, if the failure to pay
dividends were for the purpose of using the undistributed earnings & profits for the reasonable needs of the business, that
purpose would not fall to overcome the presumption and correctness of CIR.
 G.R. No. 108067, Jan. 20, 2000, Nicole Stephanie Wee, 201589812

CYANAMID PHIL., INC. V CA

Facts: Petitioner, Cyanamid Philippines, Inc., a corporation organized under Philippine laws, is a wholly owned subsidiary of American
Cyanamid Co. based in Maine, USA. CIR sent an assessment letter to petitioner and demanded the payment of deficiency in come tax of
P119,817 for taxable year 1981 which the petitioner on March 4, 1985, protested particularly (1) 25% surtax assessment of P3,774,867.50; (2) 1981
deficiency income tax assessment of P119,817; (3) 1981 deficiency percentage assessment of P3,346.72. CIR refused to allow the cancellation
of the assessment notices. During the pendency of the case on appeal to the CTA, both parties agreed to compromise the 1981 deficiency
income assessment of P119,817 and reduced to P26,577 as compromise settlement. But the surtax on improperly accumulated profits
remained unresolved. Petitioner claimed that the assessment representing the 25% surtax had no legal basis for the following reasons: (a)
petitioner accumulated its earnings and profits for reasonable business requirements to meet working capital needs and retirement of
indebtedness, (b) petitioner is wholly owned subsidiary of American Cyanamid Co., a corporation organized under the laws of the State of
Maine, in the USA, whose shares of stock are listed and traded in New York Stock Exchange. This being the case, no individual shareholder of
petitioner could have evaded or prevented the imposition of individual income taxes by petitioner’s accumulation of earnings and profits,
instead contribution of the same. CTA denied said petition.
Issue: Whether petitioner is liable for the accumulated earnings tax for the year 1981. - NO
Held: The amendatory provision of Sec. 25 of the 1977 NIRC, which was PD1739, enumerated the corporations exempt from the imposition of
improperly accumulated tax: (a) banks, (b) non-bank financial intermediaries; (c) insurance companies; and (d) corporations organized
primarily and authorized by the Central Bank to hold shares of stocks of banks. Petitioner does not fall among those exempt classes. Besides,
the laws granting exemption form tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is
the rule and exemption is the exception. The burden of proof rests upon the party claiming the exemption to prove that it is, in fact, covered
by the exemption so claimed; a burden which petitioner here has failed to discharge. Unless rebutted, all presumptions generally are indulged
in favor of the correctness of the CIR’s assessment against the taxpayer. With petitioner’s failure to prove the CIR incorrect, clearly and
conclusively, this court is constrained to uphold the correctness of tax court’s ruing as affirmed by the CA.