CIR vs.

BAIER-NICKEL

11 FEB
GR No. 153793 | August 29, 2006 | J. Ynares-Santiago

Facts:
CIR appeals the CA decision, which granted the tax refund of respondent and reversed that of the CTA. Juliane Baier-Nickel,
a non-resident German, is the president of Jubanitex, a domestic corporation engaged in the manufacturing, marketing and
selling of embroidered textile products. Through Jubanitexs general manager, Marina Guzman, the company appointed
respondent as commission agent with 10% sales commission on all sales actually concluded and collected through her
efforts.

In 1995, respondent received P1, 707, 772. 64 as sales commission from w/c Jubanitex deducted the 10% withholding tax of
P170, 777.26 and remitted to BIR. Respondent filed her income tax return but then claimed a refund from BIR for the P170K,
alleging this was mistakenly withheld by Jubanitex and that her sales commission income was compensation for services
rendered in Germany not Philippines and thus not taxable here.

She filed a petition for review with CTA for alleged non-action by BIR. CTA denied her claim but decision was reversed by CA
on appeal, holding that the commission was received as sales agent not as President and that the source of income arose
from marketing activities in Germany.

Issue: W/N respondent is entitled to refund

Held:
No. Pursuant to Sec 25 of NIRC, non-resident aliens, whether or not engaged in trade or business, are subject to the
Philippine income taxation on their income received from all sources in the Philippines. In determining the meaning of
source, the Court resorted to origin of Act 2833 (the first Philippine income tax law), the US Revenue Law of 1916, as
amended in 1917.
US SC has said that income may be derived from three possible sources only: (1) capital and/or (2) labor; and/or (3) the sale
of capital assets. If the income is from labor, the place where the labor is done should be decisive; if it is done in this country,
the income should be from sources within the United States. If the income is from capital, the place where the capital is
employed should be decisive; if it is employed in this country, the income should be from sources within the United States.
If the income is from the sale of capital assets, the place where the sale is made should be likewise decisive. Source is not a
place, it is an activity or property. As such, it has a situs or location, and if that situs or location is within the United States
the resulting income is taxable to nonresident aliens and foreign corporations.

The source of an 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.

The settled rule is that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the
taxpayer. To those therefore, who claim a refund rest the burden of proving that the transaction subjected to tax is actually
exempt from taxation.
In the instant case, respondent failed to give substantial evidence to prove that she performed the incoming producing
service in Germany, which would have entitled her to a tax exemption for income from sources outside the
Philippines. Petition granted.
 ABAKADA Guro Party List vs Executive Secretary
Bills Must Originate EXCLUSIVELY from the House of Representatives; Undue
Delegation of Legislative Power; Equal Protection Clause

ABAKADA GURO PARTY LIST VS EXECUTIVE SECRETARY

G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE
CESAR PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent.

Facts:
Petitioners ABAKADA GURO Party List challenged the constitutionality of R.A. No. 9337 particularly Sections 4, 5 and 6, amending Sections 106, 107
and 108, respectively, of the National Internal Revenue Code (NIRC). These questioned provisions contain a uniform proviso authorizing the President,
upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have been
satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article
VI, Section 28(2) of the 1987 Philippine Constitution. They further argue that VAT is a tax levied on the sale or exchange of goods and services and cannot
be included within the purview of tariffs under the exemption delegation since this refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on imported/exported goods. They also said that the President has powers to cause, influence or create the conditions
provided by law to bring about the conditions precedent. Moreover, they allege that no guiding standards are made by law as to how the Secretary of
Finance will make the recommendation. They claim, nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside by the
President since the former is a mere alter ego of the latter, such that, ultimately, it is the President who decides whether to impose the increased tax rate or
not.

Issues:

1. Whether or not R.A. No. 9337 has violated the provisions in Article VI, Section 24, and Article VI, Section 26 (2) of the Constitution.
2. Whether or not there was an undue delegation of legislative power in violation of Article VI Sec 28 Par 1 and 2 of the Constitution.
3. Whether or not there was a violation of the due process and equal protection under Article III Sec. 1 of the Constitution.

Discussions:

1. Basing from the ruling of Tolentino case, it is not the law, but the revenue bill which is required by the Constitution to originate exclusively in the
House of Representatives, but Senate has the power not only to propose amendments, but also to propose its own version even with respect to bills
which are required by the Constitution to originate in the House. the Constitution simply means is that the initiative for filing revenue, tariff or tax
bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the
theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On
the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are
thereby made to bear on the enactment of such laws.
2. In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to inquire whether the statute was complete in all its
terms and provisions when it left the hands of the legislature so that nothing was left to the judgment of any other appointee or delegate of the
legislature.
3. The equal protection clause under the Constitution means that no person or class of persons shall be deprived of the same protection of laws which is
enjoyed by other persons or other classes in the same place and in like circumstances.

Rulings:

1. R.A. No. 9337 has not violated the provisions. The revenue bill exclusively originated in the House of Representatives, the Senate was acting within
its constitutional power to introduce amendments to the House bill when it included provisions in Senate Bill No. 1950 amending corporate income
taxes, percentage, excise and franchise taxes. Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation on the
extent of the amendments that may be introduced by the Senate to the House revenue bill.
2. There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress
does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his
authority; in our complex economy that is frequently the only way in which the legislative process can go forward.
3. Supreme Court held no decision on this matter. The power of the State to make reasonable and natural classifications for the purposes of taxation has
long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods
of assessment, valuation and collection, the States power is entitled to presumption of validity. As a rule, the judiciary will not interfere with such
power absent a clear showing of unreasonableness, discrimination, or arbitrariness.

Topic: Tax Returns and Other Administrative RequirementsPASEO REALTY AND DEVELOPMENT CORP. vs.COURT

OF APPEALS

G.R. No. 119286 October 13, 2004FACTS:

Paseo Realty and Development Corporation, a domestic corporation engaged in the lease of two parcels of land at Paseo de
Roxas in Makati City. On April 16, 1990, petitioner filed its Income Tax Return for the calendaryear1989 declaring a gross
income of P1,855,000.00, deductions of P1,775,991.00, net income of P79,009.00, anincome tax due thereon in the amount of
P27,653.00, prior
years excess credit of P146,026.00, and creditable taxes withheld in 1989 of
P54,104.00 or a total tax credit of P200,130.00 and credit balance of P172,477.00.In a resolution dated October 21, 1993
Respondent Courtreconsidered its decision of July 29, 1993 and dismissed the petition for review, stating that it has
overlooked
the fact
that the petitioners
1989 Corporate Income Tax Return

indicated that the amount of P54,104.00 subject of

petitioners claim for refund has
already been included as part and parcel of the P172,477.00 which the petitioner automatically applied as tax
credit for the succeeding taxable year 1990.
Petitioner filed a Motion for Reconsideration which was denied by respondent Court on March 10,1994.Petitioner filed a Petition
for Review dated April 3, 1994with the
Courtof Appeals. Resolving the twin issues of whether petitioner is entitled to a refund of P54,104.00 representingcreditable
taxes withheld in 1989 and whether petitioner applied such creditable taxes withheld to its 1990income tax liability, the appellate
court held that petitioner is not entitled to a refund because it had alreadyelected to apply the total amount of P172,447.00, which
includes the P54,104.00 refund claimed, against itsincome tax liability for 1990. The appellate court elucidated on the reason for
its dismissal of petitioners claim
for refund.
ISSUE:
Whether or not the alleged excess taxes paid by a corporation during a taxable year should be refunded orcredited against its tax
liabilities for the succeeding year?
RULING:
The petition must be denied. As a matter of principle, it is not advisable for this Court to set aside theconclusionreached by an
agency such as the CTA which is, by the very nature of its functions, dedicated exclusively to thestudy and consideration of tax
problems and has necessarily developed an expertise on the subject, unless therehas been an abuse or improvident exercise of its
authority. This interdiction finds particular application in thiscase since the CTA, after
careful consideration of the merits of the Commissioner of Internal Revenues motion
for reconsideration, reconsidered its earlier decision which ordered the latter to refund the amount of P54,104.00 to petitioner. Its
resolution cannot be successfully assailed based, as it is, on the pertinent laws asapplied to the facts.
Petitioners 1989 tax return indicates an
aggregate creditable tax of P172,477.00, representing its 1988 excesscredit of P146,026.00 and 1989 creditable tax of P54,104.00
less tax due for 1989, which it elected to apply astax credit for the succeeding taxable year.According to petitioner, it
successively utilized this amount when it obtained refunds in CTA Case No. 4439 andCTA Case No. 4528 and applied its1990
tax liability, leaving a balance of P54,104.00, the amount subject of theinstant claim for refund.
The confusion as to petitioners entitlement to a refund could altogether have
beenavoided had it presented its tax return for 1990. Such return would have shown whether petitioner actuallyapplied its 1989
tax credit of P172,477.00, which includes the P54,104.00 creditable taxes withheld for 1989subject of the instant claim for
refund, against its 1990 tax liability as it had elected in its 1989 return, or at least,whether
petitioners tax credit of
P172,477.00 was applied to its approved refunds asitclaims. As clearly shown from the above-quoted provisions, in case
the corporation isentitled to a refund of theexcess estimated quarterly income taxes paid, the refundable amount shown on its
final adjustment return maybe credited against the estimated quarterly income tax liabilities for the taxable quarters of the
succeeding year.The carrying forward of any excess or overpaid income tax for a given taxable year is limited to the
succeedingtaxable year only. Taxation is a destructive power which interferes with the personal and property rights of thepeople
and takes from them a portion of their property for the support of the government. And since taxes arewhat we pay for civilized
society, or are the lifeblood of the nation, the law frowns against exemptions fromtaxation and statutes granting tax exemptions
are thus construed strictissimi juris against the taxpayer andliberally in favor of the taxing authority. A claim of refund or
exemption from tax payments must be clearlyshown and be based on language in the law too plain to be mistaken. Else wise
stated, taxation is the rule,exemption therefrom is the exception.