G.R. No. L-29059 December 15, 1987 on June 16, 1955, in accordance with Cebu Portland Cement Co.
on June 16, 1955, in accordance with Cebu Portland Cement Co. v. Collector of Internal
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALS, respondents.
CRUZ, J.:
By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on
appeal by the Supreme Court on February 27, 1965, the Commissioner of Internal Revenue
was ordered to refund to the Cebu Portland Cement Company the amount of P 359,408.98,
representing overpayments of ad valorem taxes on cement produced and sold by it after
October 1957. 1
On March 28, 1968, following denial of motions for reconsideration filed by both the
petitioner and the private respondent, the latter moved for a writ of execution to enforce the
said judgment . 2
The motion was opposed by the petitioner on the ground that the private respondent had an
outstanding sales tax liability to which the judgment debt had already been credited. In fact,
it was stressed, there was still a balance owing on the sales taxes in the amount of P
4,789,279.85 plus 28% surcharge. 3
On April 22, 1968, the Court of Tax Appeals * granted the motion, holding that the alleged
sales tax liability of the private respondent was still being questioned and therefore could not
be set-off against the refund. 4
In his petition to review the said resolution, the Commissioner of Internal Revenue claims
that the refund should be charged against the tax deficiency of the private respondent on the
sales of cement under Section 186 of the Tax Code. His position is that cement is a
manufactured and not a mineral product and therefore not exempt from sales taxes. He adds
that enforcement of the said tax deficiency was properly effected through his power of
distraint of personal property under Sections 316 and 318 5 of the said Code and, moreover,
the collection of any national internal revenue tax may not be enjoined under Section
305, 6 subject only to the exception prescribed in Rep. Act No. 1125. 7 This is not applicable to
the instant case. The petitioner also denies that the sales tax assessments have already
prescribed because the prescriptive period should be counted from the filing of the sales tax
returns, which had not yet been done by the private respondent.
For its part, the private respondent disclaims liability for the sales taxes, on the ground that
cement is not a manufactured product but a mineral product. 8 As such, it was exempted
from sales taxes under Section 188 of the Tax Code after the effectivity of Rep. Act No. 1299
1
Revenue, 9 decided in 1968. Here Justice Eugenio Angeles declared that "before the
effectivity of Rep. Act No. 1299, amending Section 246 of the National Internal Revenue
Code, cement was taxable as a manufactured product under Section 186, in connection with
Section 194(4) of the said Code," thereby implying that it was not considered a manufactured
product afterwards. Also, the alleged sales tax deficiency could not as yet be enforced
against it because the tax assessment was not yet final, the same being still under protest
and still to be definitely resolved on the merits. Besides, the assessment had already
prescribed, not having been made within the reglementary five-year period from the filing of
the tax returns. 10
Our ruling is that the sales tax was properly imposed upon the private respondent for the
reason that cement has always been considered a manufactured product and not a mineral
product. This matter was extensively discussed and categorically resolved in Commissioner of
Internal Revenue v. Republic Cement Corporation, 11 decided on August 10, 1983, where
Justice Efren L. Plana, after an exhaustive review of the pertinent cases, declared for a
unanimous Court:
From all the foregoing cases, it is clear that cement qua cement was
never considered as a mineral product within the meaning of Section 246
of the Tax Code, notwithstanding that at least 80% of its components are
minerals, for the simple reason that cement is the product of
a manufacturing process and is no longer the mineral product
contemplated in the Tax Code (i.e.; minerals subjected to simple
treatments) for the purpose of imposing the ad valorem tax.
What has apparently encouraged the herein respondents to maintain
their present posture is the case of Cebu Portland Cement Co. v. Collector
of Internal Revenue, L-20563, Oct. 29, 1968 (28 SCRA 789) penned by
Justice Eugenio Angeles. For some portions of that decision give the
impression that Republic Act No. 1299, which amended Section 246,
reclassified cement as a mineral product that was not subject to sales tax.
...
xxx xxx xxx
After a careful study of the foregoing, we conclude that reliance on the
decision penned by Justice Angeles is misplaced. The said decision is no
authority for the proposition that after the enactment of Republic Act No.
1299 in 1955 (defining mineral product as things with at least 80%
mineral content), cement became a 'mineral product," as distinguished
from a "manufactured product," and therefore ceased to be subject to
sales tax. It was not necessary for the Court to so rule. It was enough for
the Court to say in effect that even assuming Republic Act No. 1299 had
reclassified cement was a mineral product, the reclassification could not
 be given retrospective application (so as to justify the refund of sales
taxes paid before Republic Act 1299 was adopted) because laws operate
prospectively only, unless the legislative intent to the contrary is
manifest, which was not so in the case of Republic Act 1266. [The
situation would have been different if the Court instead had ruled in
favor of refund, in which case it would have been absolutely necessary (1)
to make an unconditional ruling that Republic Act 1299 re-classified
cement as a mineral product (not subject to sales tax), and (2) to declare
the law retroactive, as a basis for granting refund of sales tax paid before
Republic Act 1299.]
In any event, we overrule the CEPOC decision of October 29, 1968 (G.R.
No. L-20563) insofar as its pronouncements or any implication therefrom
conflict with the instant decision.
The above views were reiterated in the resolution 12 denying reconsideration of the said
decision, thus:
The nature of cement as a "manufactured product" (rather than a
"mineral product") is well-settled. The issue has repeatedly presented
itself as a threshold question for determining the basis for computing
the ad valorem mining tax to be paid by cement Companies. No
pronouncement was made in these cases that as a "manufactured
product" cement is subject to sales tax because this was not at issue.
The decision sought to be reconsidered here referred to the legislative
history of Republic Act No. 1299 which introduced a definition of the
terms "mineral" and "mineral products" in Sec. 246 of the Tax Code.
Given the legislative intent, the holding in the CEPOC case (G.R. No. L-
20563) that cement was subject to sales tax prior to the effectivity •f
Republic Act No. 1299 cannot be construed to mean that, after the law
took effect, cement ceased to be so subject to the tax. To erase any and
all misconceptions that may have been spawned by reliance on the case
of Cebu Portland Cement Co. v. Collector of Internal Revenue, L-20563,
October 29, 1968 (28 SCRA 789) penned by Justice Eugenio Angeles, the
Court has expressly overruled it insofar as it may conflict with the
decision of August 10, 1983, now subject of these motions for
reconsideration.
On the question of prescription, the private respondent claims that the five-year
reglementary period for the assessment of its tax liability started from the time it filed its
gross sales returns on June 30, 1962. Hence, the assessment for sales taxes made on January
16, 1968 and March 4, 1968, were already out of time. We disagree. This contention must fail
for what CEPOC filed was not the sales returns required in Section 183(n) but the ad
2
valorem tax returns required under Section 245 of the Tax Code. As Justice Irene R. Cortes
emphasized in the aforestated resolution:
In order to avail itself of the benefits of the five-year prescription period
under Section 331 of the Tax Code, the taxpayer should have filed the
required return for the tax involved, that is, a sales tax return. (Butuan
Sawmill, Inc. v. CTA, et al., G.R. No. L-21516, April 29, 1966, 16 SCRA 277).
Thus CEPOC should have filed sales tax returns of its gross sales for the
subject periods. Both parties admit that returns were made for the ad
valorem mining tax. CEPOC argues that said returns contain the
information necessary for the assessment of the sales tax. The
Commissioner does not consider such returns as compliance with the
requirement for the filing of tax returns so as to start the running of the
five-year prescriptive period.
We agree with the Commissioner. It has been held in Butuan Sawmill Inc.
v. CTA, supra, that the filing of an income tax return cannot be
considered as substantial compliance with the requirement of filing sales
tax returns, in the same way that an income tax return cannot be
considered as a return for compensating tax for the purpose of
computing the period of prescription under Sec. 331. (Citing Bisaya Land
Transportation Co., Inc. v. Collector of Internal Revenue, G.R. Nos. L-
12100 and L-11812, May 29, 1959). There being no sales tax returns filed
by CEPOC, the statute of stations in Sec. 331 did not begin to run against
the government. The assessment made by the Commissioner in 1968 on
CEPOC's cement sales during the period from July 1, 1959 to December
31, 1960 is not barred by the five-year prescriptive period. Absent a
return or when the return is false or fraudulent, the applicable period is
ten (10) days from the discovery of the fraud, falsity or omission. The
question in this case is: When was CEPOC's omission to file tha return
deemed discovered by the government, so as to start the running of said
period? 13
The argument that the assessment cannot as yet be enforced because it is still being
contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the
government." If the payment of taxes could be postponed by simply questioning their
validity, the machinery of the state would grind to a halt and all government functions
would be paralyzed. That is the reason why, save for the exception already noted, the Tax
Code provides:
Sec. 291. Injunction not available to restrain collection of tax. — No court
shall have authority to grant an injunction to restrain the collection of
any national internal revenue tax, fee or charge imposed by this Code.
It goes without saying that this injunction is available not only when the assessment is G.R. Nos. 89898-99 October 1, 1990
already being questioned in a court of justice but more so if, as in the instant case, the
challenge to the assessment is still-and only-on the administrative level. There is all the more MUNICIPALITY OF MAKATI, petitioner,
reason to apply the rule here because it appears that even after crediting of the refund vs.
against the tax deficiency, a balance of more than P 4 million is still due from the private THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as Judge RTC
respondent. of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and SHERIFF
SILVINO R. PASTRANA, respondents.
To require the petitioner to actually refund to the private respondent the amount of the
judgment debt, which he will later have the right to distrain for payment of its sales tax Defante & Elegado for petitioner.
liability is in our view an Idle ritual. We hold that the respondent Court of Tax Appeals erred
in ordering such a charade.
Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.

WHEREFORE, the petition is GRANTED. The resolution dated April 22, 1968, in CTA Case No.
RESOLUTION
786 is SET ASIDE, without any pronouncement as to costs.

CORTÉS, J.:
SO ORDERED.

The present petition for review is an off-shoot of expropriation proceedings initiated by

petitioner Municipality of Makati against private respondent Admiral Finance Creditors
Consortium, Inc., Home Building System & Realty Corporation and one Arceli P. Jo, involving
a parcel of land and improvements thereon located at Mayapis St., San Antonio Village,
Makati and registered in the name of Arceli P. Jo under TCT No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil
Case No. 13699. Attached to petitioner's complaint was a certification that a bank account
(Account No. S/A 265-537154-3) had been opened with the PNB Buendia Branch under
petitioner's name containing the sum of P417,510.00, made pursuant to the provisions of
Pres. Decree No. 42. After due hearing where the parties presented their respective appraisal
reports regarding the value of the property, respondent RTC judge rendered a decision on
June 4, 1987, fixing the appraised value of the property at P5,291,666.00, and ordering
petitioner to pay this amount minus the advanced payment of P338,160.00 which was earlier
released to private respondent.

After this decision became final and executory, private respondent moved for the issuance of
a writ of execution. This motion was granted by respondent RTC judge. After issuance of the
writ of execution, a Notice of Garnishment dated January 14, 1988 was served by respondent
sheriff Silvino R. Pastrana upon the manager of the PNB Buendia Branch. However,
respondent sheriff was informed that a "hold code" was placed on the account of petitioner.
As a result of this, private respondent filed a motion dated January 27, 1988 praying that an
order be issued directing the bank to deliver to respondent sheriff the amount equivalent to
the unpaid balance due under the RTC decision dated June 4, 1987.

Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment
of the expropriation amount should be done in installments which the respondent RTC judge
failed to state in his decision. Private respondent filed its opposition to the motion.
3
Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation"
informing the court that private respondent was no longer the true and lawful owner of the
subject property because a new title over the property had been registered in the name of
Philippine Savings Bank, Inc. (PSB) Respondent RTC judge issued an order requiring PSB to
make available the documents pertaining to its transactions over the subject property, and
the PNB Buendia Branch to reveal the amount in petitioner's account which was garnished by
respondent sheriff. In compliance with this order, PSB filed a manifestation informing the
court that it had consolidated its ownership over the property as mortgagee/purchaser at an
extrajudicial foreclosure sale held on April 20, 1987. After several conferences, PSB and
private respondent entered into a compromise agreement whereby they agreed to divide
between themselves the compensation due from the expropriation proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1)
approved the compromise agreement; (2) ordered PNB Buendia Branch to immediately
release to PSB the sum of P4,953,506.45 which corresponds to the balance of the appraised
value of the subject property under the RTC decision dated June 4, 1987, from the garnished
account of petitioner; and, (3) ordered PSB and private respondent to execute the necessary
deed of conveyance over the subject property in favor of petitioner. Petitioner's motion to lift
the garnishment was denied.
Petitioner filed a motion for reconsideration, which was duly opposed by private respondent.
On the other hand, for failure of the manager of the PNB Buendia Branch to comply with the
order dated September 8, 1988, private respondent filed two succeeding motions to require
the bank manager to show cause why he should not be held in contempt of court. During the
hearings conducted for the above motions, the general manager of the PNB Buendia Branch,
a Mr. Antonio Bautista, informed the court that he was still waiting for proper authorization
from the PNB head office enabling him to make a disbursement for the amount so ordered.
For its part, petitioner contended that its funds at the PNB Buendia Branch could neither be
garnished nor levied upon execution, for to do so would result in the disbursement of public
funds without the proper appropriation required under the law, citing the case of Republic of
the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA 899].
Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion
for reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not
apply to the case because petitioner's PNB Account No. S/A 265-537154-3 was an account
specifically opened for the expropriation proceedings of the subject property pursuant to
Pres. Decree No. 42. Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of
contempt of court for his inexcusable refusal to obey the order dated September 8, 1988,
and thus ordered his arrest and detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions
for certiorari with the Court of Appeals, which were eventually consolidated. In a decision
promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of
merit, sustained the jurisdiction of respondent RTC judge over the funds contained in
petitioner's PNB Account No. 265-537154-3, and affirmed his authority to levy on such funds.
4
Its motion for reconsideration having been denied by the Court of Appeals, petitioner now
files the present petition for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining
respondent RTC judge, respondent sheriff, and their representatives, from enforcing and/or
carrying out the RTC order dated December 21, 1988 and the writ of garnishment issued
pursuant thereto. Private respondent then filed its comment to the petition, while petitioner
filed its reply.
Petitioner not only reiterates the arguments adduced in its petition before the Court of
Appeals, but also alleges for the first time that it has actually two accounts with the PNB
Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of
the subject property, with an outstanding balance of P99,743.94.
(2) Account No. S/A 263-530850-7 — for statutory obligations and other
purposes of the municipal government, with a balance of
P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this Court the existence of two bank
accounts, it may fairly be asked whether the second account was opened only for the
purpose of undermining the legal basis of the assailed orders of respondent RTC judge and
the decision of the Court of Appeals, and strengthening its reliance on the doctrine that
public funds are exempted from garnishment or execution as enunciated in Republic v.
Palacio [supra.] At any rate, the Court will give petitioner the benefit of the doubt, and
proceed to resolve the principal issues presented based on the factual circumstances thus
alleged by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for
expropriation proceedings it had initiated over the subject property, petitioner poses no
objection to the garnishment or the levy under execution of the funds deposited therein
amounting to P99,743.94. However, it is petitioner's main contention that inasmuch as the
assailed orders of respondent RTC judge involved the net amount of P4,965,506.45, the
funds garnished by respondent sheriff in excess of P99,743.94, which are public funds
earmarked for the municipal government's other statutory obligations, are exempted from
execution without the proper appropriation required under the law.
There is merit in this contention. The funds deposited in the second PNB Account No. S/A 400. See also Provincial Government of Sorsogon v. Vda. de Villaroya,
263-530850-7 are public funds of the municipal government. In this jurisdiction, well-settled G.R. No. 64037, August 27, 1987, 153 SCRA 291].
is the rule that public funds are not subject to levy and execution, unless otherwise
provided for by statute [Republic v. Palacio, supra.; The Commissioner of Public Highways v. The State's power of eminent domain should be exercised within the bounds of fair play
San Diego, G.R. No. L-30098, February 18, 1970, 31 SCRA 616]. More particularly, the and justice. In the case at bar, considering that valuable property has been taken, the
properties of a municipality, whether real or personal, which are necessary for public use compensation to be paid fixed and the municipality is in full possession and utilizing the
cannot be attached and sold at execution sale to satisfy a money judgment against the property for public purpose, for three (3) years, the Court finds that the municipality has
municipality. Municipal revenues derived from taxes, licenses and market fees, and which had more than reasonable time to pay full compensation.
are intended primarily and exclusively for the purpose of financing the governmental
activities and functions of the municipality, are exempt from execution [See Viuda De Tan
WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately
Toco v. The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, Ilocos
pay Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45.
Norte v. Manaois, 86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R.
Petitioner is hereby required to submit to this Court a report of its compliance with the
No. 61744, June 25, 1984, 130 SCRA 56]. The foregoing rule finds application in the case at
foregoing order within a non-extendible period of SIXTY (60) DAYS from the date of receipt of
bar. Absent a showing that the municipal council of Makati has passed an ordinance
this resolution.
appropriating from its public funds an amount corresponding to the balance due under the
RTC decision dated June 4, 1987, less the sum of P99,743.94 deposited in Account No. S/A
265-537154-3, no levy under execution may be validly effected on the public funds of The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil
petitioner deposited in Account No. S/A 263-530850-7. Case No. 13699, is SET ASIDE and the temporary restraining order issued by the Court on
November 20, 1989 is MADE PERMANENT.
Nevertheless, this is not to say that private respondent and PSB are left with no legal
recourse. Where a municipality fails or refuses, without justifiable reason, to effect payment SO ORDERED.
of a final money judgment rendered against it, the claimant may avail of the remedy
of mandamus in order to compel the enactment and approval of the necessary appropriation
ordinance, and the corresponding disbursement of municipal funds therefor [See Viuda De
Tan Toco v. The Municipal Council of Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960);
Yuviengco v. Gonzales, 108 Phil. 247 (1960)].

In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by
petitioner. No appeal was taken therefrom. For three years now, petitioner has enjoyed
possession and use of the subject property notwithstanding its inexcusable failure to comply
with its legal obligation to pay just compensation. Petitioner has benefited from its
possession of the property since the same has been the site of Makati West High School since
the school year 1986-1987. This Court will not condone petitioner's blatant refusal to settle
its legal obligation arising from expropriation proceedings it had in fact initiated. It cannot
be over-emphasized that, within the context of the State's inherent power of eminent
domain,

. . . [j]ust compensation means not only the correct determination of the

amount to be paid to the owner of the land but also the payment of the
land within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered "just" for the property owner is made
to suffer the consequence of being immediately deprived of his land while
being made to wait for a decade or more before actually receiving the
amount necessary to cope with his loss [Cosculluela v. The Honorable
Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393,

5
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
CRUZ, J.:
Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance On the other hand, such collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the taxpayers so that
the real purpose of taxation, which is the promotion of the common good, may be
achieved.
The main issue in this case is whether or not the Collector of Internal Revenue correctly
disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate
business expenses in its income tax returns. The corollary issue is whether or not the appeal
of the private respondent from the decision of the Collector of Internal Revenue was made
on time and in accordance with law.
We deal first with the procedural question.
The record shows that on January 14, 1965, the private respondent, a domestic corporation
engaged in engineering, construction and other allied activities, received a letter from the
petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the
years 1958 and 1959.1 On January 18, 1965, Algue flied a letter of protest or request for
reconsideration, which letter was stamp received on the same day in the office of the
petitioner. 2 On March 12, 1965, a warrant of distraint and levy was presented to the private
respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the
ground of the pending protest. 3 A search of the protest in the dockets of the case proved
fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon
Reyes, who deferred service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally
informed that the BIR was not taking any action on the protest and it was only then that he
accepted the warrant of distraint and levy earlier sought to be served.5 Sixteen days later, on
April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of
Internal Revenue with the Court of Tax Appeals.6
The above chronology shows that the petition was filed seasonably. According to Rep. Act
No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling
challenged.7 It is true that as a rule the warrant of distraint and levy is "proof of the finality
of the assessment" 8 and renders hopeless a request for reconsideration," 9 being
"tantamount to an outright denial thereof and makes the said request deemed
6
rejected." 10 But there is a special circumstance in the case at bar that prevents application
of this accepted doctrine.
The proven fact is that four days after the private respondent received the petitioner's notice
of assessment, it filed its letter of protest. This was apparently not taken into account before
the warrant of distraint and levy was issued; indeed, such protest could not be located in the
office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that
it was, if at all, considered by the tax authorities. During the intervening period, the warrant
was premature and could therefore not be served.
As the Court of Tax Appeals correctly noted," 11 the protest filed by private respondent was
not pro forma and was based on strong legal considerations. It thus had the effect of
suspending on January 18, 1965, when it was filed, the reglementary period which started on
the date the assessment was received, viz., January 14, 1965. The period started running
again only on April 7, 1965, when the private respondent was definitely informed of the
implied rejection of the said protest and the warrant was finally served on it. Hence, when
the appeal was filed on April 23, 1965, only 20 days of the reglementary period had been
consumed.
Now for the substantive question.
The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed
because it was not an ordinary reasonable or necessary business expense. The Court of Tax
Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been
legitimately paid by the private respondent for actual services rendered. The payment was
in the form of promotional fees. These were collected by the Payees for their work in the
creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent
purchase of the properties of the Philippine Sugar Estate Development Company.
Parenthetically, it may be observed that the petitioner had Originally claimed these
promotional fees to be personal holding company income 12 but later conformed to the
decision of the respondent court rejecting this assertion.13 In fact, as the said court found,
the amount was earned through the joint efforts of the persons among whom it was
distributed It has been established that the Philippine Sugar Estate Development Company
had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil
manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara,
Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the
Vegetable Oil Investment Corporation, inducing other persons to invest in it.14 Ultimately,
after its incorporation largely through the promotion of the said persons, this new
corporation purchased the PSEDC properties.15 For this sale, Algue received as agent a
commission of P126,000.00, and it was from this commission that the P75,000.00
promotional fees were paid to the aforenamed individuals.16
There is no dispute that the payees duly reported their respective shares of the fees in their
income tax returns and paid the corresponding taxes thereon.17 The Court of Tax Appeals
also found, after examining the evidence, that no distribution of dividends was involved.18
The petitioner claims that these payments are fictitious because most of the payees are
members of the same family in control of Algue. It is argued that no indication was made as
to how such payments were made, whether by check or in cash, and there is not enough
substantiation of such payments. In short, the petitioner suggests a tax dodge, an attempt
to evade a legitimate assessment by involving an imaginary deduction.
We find that these suspicions were adequately met by the private respondent when its
President, Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the
payments were not made in one lump sum but periodically and in different amounts as each
payee's need arose. 19 It should be remembered that this was a family corporation where
strict business procedures were not applied and immediate issuance of receipts was not
required. Even so, at the end of the year, when the books were to be closed, each payee
made an accounting of all of the fees received by him or her, to make up the total of
P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement was
understandable, however, in view of the close relationship among the persons in the family
corporation.
We agree with the respondent court that the amount of the promotional fees was not
excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the
private respondent was P125,000.00. 21After deducting the said fees, Algue still had a
balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was
60% of the total commission. This was a reasonable proportion, considering that it was the
payees who did practically everything, from the formation of the Vegetable Oil Investment
Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the
respondent court is in accord with the following provision of the Tax Code:
SEC. 30. Deductions from gross income.--In computing net income there
shall be allowed as deductions —
(a) Expenses:
(1) In general.--All the ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal
services actually rendered; ... 22
and Revenue Regulations No. 2, Section 70 (1), reading as follows:
SEC. 70. Compensation for personal services.--Among the ordinary and
necessary expenses paid or incurred in carrying on any trade or business
7
may be included a reasonable allowance for salaries or other
compensation for personal services actually rendered. The test of
deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and
deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and
its practical application may be further stated and illustrated as follows:
Any amount paid in the form of compensation, but not in fact as the
purchase price of services, is not deductible. (a) An ostensible salary paid
by a corporation may be a distribution of a dividend on stock. This is likely
to occur in the case of a corporation having few stockholders, Practically
all of whom draw salaries. If in such a case the salaries are in excess of
those ordinarily paid for similar services, and the excessive payment
correspond or bear a close relationship to the stockholdings of the
officers of employees, it would seem likely that the salaries are not paid
wholly for services rendered, but the excessive payments are a
distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931,
30 O.G. No. 18, 325.)
It is worth noting at this point that most of the payees were not in the regular employ of
Algue nor were they its controlling stockholders. 23
The Solicitor General is correct when he says that the burden is on the taxpayer to prove the
validity of the claimed deduction. In the present case, however, we find that the onus has
been discharged satisfactorily. The private respondent has proved that the payment of the
fees was necessary and reasonable in the light of the efforts exerted by the payees in
inducing investors and prominent businessmen to venture in an experimental enterprise and
involve themselves in a new business requiring millions of pesos. This was no mean feat and
should be, as it was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence, despite
the natural reluctance to surrender part of one's hard earned income to the taxing
authorities, every person who is able to must contribute his share in the running of the
government. The government for its part, is expected to respond in the form of tangible
and intangible benefits intended to improve the lives of the people and enhance their
moral and material values. This symbiotic relationship is the rationale of taxation and should
dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of
power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement
in all democratic regimes that it be exercised reasonably and in accordance with the
prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts
will then come to his succor. For all the awesome power of the tax collector, he may still be
stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not
been observed.
We hold that the appeal of the private respondent from the decision of the petitioner was
filed on time with the respondent court in accordance with Rep. Act No. 1125. And we also
find that the claimed deduction by the private respondent was permitted under the Internal
Revenue Code and should therefore not have been disallowed by the petitioner.
ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMED in
toto, without costs.
SO ORDERED.
8
[G.R. No. 122480. April 12, 2000]
BPI-FAMILY SAVINGS BANK, Inc., petitioner, vs. COURT OF APPEALS, COURT OF TAX
APPEALS and the COMMISSIONER OF INTERNAL REVENUE, respondents.
DECISION
PANGANIBAN, J.:
If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so
must it apply the same standard against itself in refunding excess payments. When it is
undisputed that a taxpayer is entitled to a refund, the State should not invoke
technicalities to keep money not belonging to it. No one, not even the State, should enrich
oneself at the expense of another.
The Case
Before us is a Petition for Review assailing the March 31, 1995 Decision of the Court of
Appeals[1] (CA) in CA-GR SP No. 34240, which affirmed the December 24, 1993 Decision[2] of
the Court of Tax Appeals (CTA). The CA disposed as follows:
"WHEREFORE, foregoing premises considered, the petition is hereby
DISMISSED for lack of merit."[3]
On the other hand, the dispositive portion of the CTA Decision affirmed by the CA reads as
follows:
"WHEREFORE, in [view of] all the foregoing, Petitioners claim for refund is
hereby DENIED and this Petition for Review is DISMISSED for lack of
merit."[4]
Also assailed is the November 8, 1995 CA Resolution[5] denying reconsideration.
The Facts
The facts of this case were summarized by the CA in this wise:
"This case involves a claim for tax refund in the amount of P112,491.00
representing petitioners tax withheld for the year 1989.
In its Corporate Annual Income Tax Return for the year 1989, the
following items are reflected:
 Income.............................P1,017,931,831.00
Deductions........................P1,026,218,791.00
Net Income (Loss).................(P8,286,960.00)
Taxable Income (Loss).............P8,286,960.00
Less:
1988 Tax Credit...............P185,001.00
1989 Tax Credit...............P112,491.00
TOTAL AMOUNT......................P297,492.00
REFUNDABLE
"It appears from the foregoing 1989 Income Tax Return that petitioner
had a total refundable amount of P297,492 inclusive of the P112,491.00
being claimed as tax refund in the present case. However, petitioner
declared in the same 1989 Income Tax Return that the said total
refundable amount of P297,492.00 will be applied as tax credit to the
succeeding taxable year.
"On October 11, 1990, petitioner filed a written claim for refund in the
amount of P112,491.00 with the respondent Commissioner of Internal
Revenue alleging that it did not apply the 1989 refundable amount of
P297,492.00 (including P112,491.00) to its 1990 Annual Income Tax
Return or other tax liabilities due to the alleged business losses it
incurred for the same year.
"Without waiting for respondent Commissioner of Internal Revenue to
act on the claim for refund, petitioner filed a petition for review with
respondent Court of Tax Appeals, seeking the refund of the amount
of P112,491.00.
"The respondent Court of Tax Appeals dismissed petitioners petition on
the ground that petitioner failed to present as evidence its Corporate
Annual Income Tax Return for 1990 to establish the fact that petitioner
had not yet credited the amount of P297,492.00 (inclusive of the
amount P112,491.00 which is the subject of the present controversy) to
its 1990 income tax liability.
"Petitioner filed a motion for reconsideration, however, the same was
denied by respondent court in its Resolution dated May 6, 1994."[6]
As earlier noted, the CA affirmed the CTA. Hence, this Petition.[7]
9
Ruling of the Court of Appeals
In affirming the CTA, the Court of Appeals ruled as follows:
"It is incumbent upon the petitioner to show proof that it has not
credited to its 1990 Annual income Tax Return, the amount of
P297,492.00 (including P112,491.00), so as to refute its previous
declaration in the 1989 Income Tax Return that the said amount will be
applied as a tax credit in the succeeding year of 1990. Having failed to
submit such requirement, there is no basis to grant the claim for refund.
xxx
"Tax refunds are in the nature of tax exemptions. As such, they are
regarded as in derogation of sovereign authority and to be
construed strictissimi juris against the person or entity claiming the
exemption. In other words, the burden of proof rests upon the taxpayer
to establish by sufficient and competent evidence its entitlement to the
claim for refund."[8]
Issue
In their Memorandum, respondents identify the issue in this wise:
"The sole issue to be resolved is whether or not petitioner is entitled to
the refund of P112,491.00, representing excess creditable withholding
tax paid for the taxable year 1989."[9]
The Courts Ruling
The Petition is meritorious.
Main Issue: Petitioner Entitled to Refund
It is undisputed that petitioner had excess withholding taxes for the year 1989 and was thus
entitled to a refund amounting to P112,491. Pursuant to Section 69[10] of the 1986 Tax Code
which states that a corporation entitled to a refund may opt either (1) to obtain such refund
or (2) to credit said amount for the succeeding taxable year, petitioner indicated in its 1989
Income Tax Return that it would apply the said amount as a tax credit for the succeeding
taxable year, 1990. Subsequently, petitioner informed the Bureau of Internal Revenue (BIR)
that it would claim the amount as a tax refund, instead of applying it as a tax credit. When no
action from the BIR was forthcoming, petitioner filed its claim with the Court of Tax Appeals.
The CTA and the CA, however, denied the claim for tax refund. Since petitioner declared in
its 1989 Income Tax Return that it would apply the excess withholding tax as a tax credit
for the following year, the Tax Court held that petitioner was presumed to have done so.
The CTA and the CA ruled that petitioner failed to overcome this presumption because it
did not present its 1990 Return, which would have shown that the amount in dispute was
not applied as a tax credit. Hence, the CA concluded that petitioner was not entitled to a
tax refund.
We disagree with the Court of Appeals. As a rule, the factual findings of the appellate court
are binding on this Court. This rule, however, does not apply where, inter alia, the judgment
is premised on a misapprehension of facts, or when the appellate court failed to notice
certain relevant facts which if considered would justify a different conclusion. [11] This case is
one such exception.
In the first place, petitioner presented evidence to prove its claim that it did not apply the
amount as a tax credit. During the trial before the CTA, Ms. Yolanda Esmundo, the manager
of petitioners accounting department, testified to this fact. It likewise presented its claim for
refund and a certification issued by Mr. Gil Lopez, petitioners vice-president, stating that the
amount of P112,491 "has not been and/or will not be automatically credited/offset against
any succeeding quarters income tax liabilities for the rest of the calendar year ending
December 31, 1990." Also presented were the quarterly returns for the first two quarters of
1990.
The Bureau of Internal Revenue, for its part, failed to controvert petitioners claim. In fact, it
presented no evidence at all. Because it ought to know the tax records of all taxpayers, the
CIR could have easily disproved petitioners claim. To repeat, it did not do so.
More important, a copy of the Final Adjustment Return for 1990 was attached to
petitioners Motion for Reconsideration filed before the CTA.[12] A final adjustment return
shows whether a corporation incurred a loss or gained a profit during the taxable year. In this
case, that Return clearly showed that petitioner incurred P52,480,173 as net loss in 1990.
Clearly, it could not have applied the amount in dispute as a tax credit.
Again, the BIR did not controvert the veracity of the said return. It did not even file an
opposition to petitioners Motion and the 1990 Final Adjustment Return attached thereto. In
denying the Motion for Reconsideration, however, the CTA ignored the said Return. In the
same vein, the CA did not pass upon that significant document.
True, strict procedural rules generally frown upon the submission of the Return after the
trial. The law creating the Court of Tax Appeals, however, specifically provides that
proceedings before it "shall not be governed strictly by the technical rules of
evidence."[13] The paramount consideration remains the ascertainment of truth. Verily, the
quest for orderly presentation of issues is not an absolute. It should not bar courts from
considering undisputed facts to arrive at a just determination of a controversy.
10
In the present case, the Return attached to the Motion for Reconsideration clearly showed
that petitioner suffered a net loss in 1990. Contrary to the holding of the CA and the CTA,
petitioner could not have applied the amount as a tax credit. In failing to consider the said
Return, as well as the other documentary evidence presented during the trial, the appellate
court committed a reversible error.
It should be stressed that the rationale of the rules of procedure is to secure a just
determination of every action. They are tools designed to facilitate the attainment of
justice.[14] But there can be no just determination of the present action if we ignore, on
grounds of strict technicality, the Return submitted before the CTA and even before this
Court.[15] To repeat, the undisputed fact is that petitioner suffered a net loss in 1990;
accordingly, it incurred no tax liability to which the tax credit could be applied.
Consequently, there is no reason for the BIR and this Court to withhold the tax refund which
rightfully belongs to the petitioner.
Public respondents maintain that what was attached to petitioners Motion for
Reconsideration was not the final adjustment Return, but petitioners first two quarterly
returns for 1990.[16] This allegation is wrong. An examination of the records shows that the
1990 Final Adjustment Return was attached to the Motion for Reconsideration. On the other
hand, the two quarterly returns for 1990 mentioned by respondent were in fact attached to
the Petition for Review filed before the CTA. Indeed, to rebut respondents specific
contention, petitioner submitted before us its Surrejoinder, to which was attached the
Motion for Reconsideration and Exhibit "A" thereof, the Final Adjustment Return for 1990.[17]
CTA Case No. 4897
Petitioner also calls the attention of this Court, as it had done before the CTA, to a Decision
rendered by the Tax Court in CTA Case No. 4897, involving its claim for refund for the year
1990. In that case, the Tax Court held that "petitioner suffered a net loss for the taxable year
1990 x x x."[18] Respondent, however, urges this Court not to take judicial notice of the said
case.[19]
As a rule, "courts are not authorized to take judicial notice of the contents of the records of
other cases, even when such cases have been tried or are pending in the same court, and
notwithstanding the fact that both cases may have been heard or are actually pending
before the same judge."[20]
Be that as it may, Section 2, Rule 129 provides that courts may take judicial notice of
matters ought to be known to judges because of their judicial functions. In this case, the
Court notes that a copy of the Decision in CTA Case No. 4897 was attached to the Petition for
Review filed before this Court. Significantly, respondents do not claim at all that the said
Decision was fraudulent or nonexistent. Indeed, they do not even dispute the contents of
the said Decision, claiming merely that the Court cannot take judicial notice thereof.
To our mind, respondents reasoning underscores the weakness of their case. For if they had
really believed that petitioner is not entitled to a tax refund, they could have easily proved
that it did not suffer any loss in 1990. Indeed, it is noteworthy that respondents opted not to
assail the fact appearing therein -- that petitioner suffered a net loss in 1990 in the same way
that it refused to controvert the same fact established by petitioners other documentary
exhibits.
In any event, the Decision in CTA Case No. 4897 is not the sole basis of petitioners case. It is
merely one more bit of information showing the stark truth: petitioner did not use its 1989
refund to pay its taxes for 1990.
Finally, respondents argue that tax refunds are in the nature of tax exemptions and are to be
construed strictissimi juris against the claimant. Under the facts of this case, we hold that
petitioner has established its claim. Petitioner may have failed to strictly comply with the
rules of procedure; it may have even been negligent. These circumstances, however, should
not compel the Court to disregard this cold, undisputed fact: that petitioner suffered a net
loss in 1990, and that it could not have applied the amount claimed as tax credits.
Substantial justice, equity and fair play are on the side of petitioner. Technicalities and
legalisms, however exalted, should not be misused by the government to keep money not
belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the
State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it
apply the same standard against itself in refunding excess payments of such taxes. Indeed,
the State must lead by its own example of honor, dignity and uprightness.
WHEREFORE, the Petition is hereby GRANTED and the assailed Decision and Resolution of
the Court of Appeals REVERSED and SET ASIDE. The Commissioner of Internal Revenue is
ordered to refund to petitioner the amount of P112,491 as excess creditable taxes paid in
1989. No costs.SO ORDERED.
11
G.R. No. L-68252 May 26, 1995
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES INC., and
COURT OF TAX APPEALS, respondents.
PUNO, J.:
For resolution is whether or not private respondent Tokyo Shipping Co. Ltd., is entitled to a
refund or tax credit for amounts representing pre-payment of income and common
carrier's taxes under the National Internal Revenue Code, section 24 (b) (2), as amended.1
Private respondent is a foreign corporation represented in the Philippines by Soriamont
Steamship Agencies, Incorporated. It owns and operates tramper vessel M/V Gardenia. In
December 1980, NASUTRA2 chartered M/V Gardenia to load 16,500 metric tons of raw sugar
in the Philippines.3 On December 23, 1980, Mr. Edilberto Lising, the operations supervisor of
Soriamont Agency,4 paid the required income and common carrier's taxes in the respective
sums of FIFTY-NINE THOUSAND FIVE HUNDRED TWENTY-THREE PESOS and SEVENTY-FIVE
CENTAVOS (P59,523.75) and FORTY-SEVEN THOUSAND SIX HUNDRED NINETEEN PESOS
(P47,619.00), or a total of ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-TWO
PESOS and SEVENTY-FIVE CENTAVOS (P107,142.75) based on the expected gross receipts of
the vessel.5 Upon arriving, however, at Guimaras Port of Iloilo, the vessel found no sugar for
loading. On January 10, 1981, NASUTRA and private respondent's agent mutually agreed to
have the vessel sail for Japan without any cargo.
Claiming the pre-payment of income and common carrier's taxes as erroneous since no
receipt was realized from the charter agreement, private respondent instituted a claim for
tax credit or refund of the sum ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY-
TWO PESOS and SEVENTY-FIVE CENTAVOS (P107,142.75) before petitioner Commissioner of
Internal Revenue on March 23, 1981. Petitioner failed to act promptly on the claim, hence,
on May 14, 1981, private respondent filed a petition for review6 before public respondent
Court of Tax Appeals.
Petitioner contested the petition. As special and affirmative defenses, it alleged the
following: that taxes are presumed to have been collected in accordance with law; that in
an action for refund, the burden of proof is upon the taxpayer to show that taxes are
erroneously or illegally collected, and the taxpayer's failure to sustain said burden is fatal
to the action for refund; and that claims for refund are construed strictly against tax
claimants.7
After trial, respondent tax court decided in favor of the private respondent. It held:
 It has been shown in this case that 1) the petitioner has complied with
the mentioned statutory requirement by having filed a written claim for
refund within the two-year period from date of payment; 2) the
respondent has not issued any deficiency assessment nor disputed the
correctness of the tax returns and the corresponding amounts of
prepaid income and percentage taxes; and 3) the chartered vessel sailed
out of the Philippine port with absolutely no cargo laden on board as
cleared and certified by the Customs authorities; nonetheless 4)
respondent's apparent bit of reluctance in validating the legal merit of
the claim, by and large, is tacked upon the "examiner who is
investigating petitioner's claim for refund which is the subject matter of
this case has not yet submitted his report. Whether or not respondent
will present his evidence will depend on the said report of the examiner."
(Respondent's Manifestation and Motion dated September 7, 1982). Be
that as it may the case was submitted for decision by respondent on the
basis of the pleadings and records and by petitioner on the evidence
presented by counsel sans the respective memorandum.
An examination of the records satisfies us that the case presents no
dispute as to relatively simple material facts. The circumstances obtaining
amply justify petitioner's righteous indignation to a more expeditious
action. Respondent has offered no reason nor made effort to submit any
controverting documents to bash that patina of legitimacy over the claim.
But as might well be, towards the end of some two and a half years of
seeming impotent anguish over the pendency, the respondent
Commissioner of Internal Revenue would furnish the satisfaction of
ultimate solution by manifesting that "it is now his turn to present
evidence, however, the Appellate Division of the BIR has already
recommended the approval of petitioner's claim for refund subject
matter of this petition. The examiner who examined this case has also
recommended the refund of petitioner's claim. Without prejudice to
withdrawing this case after the final approval of petitioner's claim, the
Court ordered the resetting to September 7, 1983." (Minutes of June 9,
1983 Session of the Court) We need not fashion any further issue into an
apparently settled legal situation as far be it from a comedy of errors it
would be too much of a stretch to hold and deny the refund of the
amount of prepaid income and common carrier's taxes for which
petitioner could no longer be made accountable.
On August 3, 1984, respondent court denied petitioner's motion for reconsideration, hence,
this petition for review on certiorari.
Petitioner now contends: (1) private respondent has the burden of proof to support its
claim of refund; (2) it failed to prove that it did not realize any receipt from its charter
agreement; and (3) it suppressed evidence when it did not present its charter agreement.
12
We find no merit in the petition.
There is no dispute about the applicable law. It is section 24 (b) (2) of the National Internal
Revenue Code which at that time provides as follows:
A corporation organized, authorized, or existing under the laws of any
foreign country, engaged in trade or business within the Philippines, shall
be taxable as provided in subsection (a) of this section upon the total net
income derived in the preceding taxable year from all sources within
the Philippines: Provided, however, That international carriers shall pay
a tax of two and one-half per cent (2 1/2%) on their gross Philippine
billings: "Gross Philippine Billings" include gross revenue realized from
uplifts anywhere in the world by any international carrier doing business
in the Philippines of passage documents sold therein, whether for
passenger, excess baggage or mail, provided the cargo or mail originates
from the Philippines. The gross revenue realized from the said cargo or
mail include the gross freight charge up to final destination. Gross
revenue from chartered flights originating from the Philippines shall
likewise form part of "Gross Philippine Billings" regardless of the place or
payment of the passage documents . . . . .
Pursuant to this provision, a resident foreign corporation engaged in the transport of cargo is
liable for taxes depending on the amount of income it derives from sources within the
Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to
have earned income sourced from the Philippines.
We agree with petitioner that a claim for refund is in the nature of a claim for
exemption8 and should be construed in strictissimi juris against the taxpayer.9 Likewise, there
can be no disagreement with petitioner's stance that private respondent has the burden of
proof to establish the factual basis of its claim for tax refund.
The pivotal issue involves a question of fact — whether or not the private respondent was
able to prove that it derived no receipts from its charter agreement, and hence is entitled to
a refund of the taxes it pre-paid to the government.
The respondent court held that sufficient evidence has been adduced by the private
respondent proving that it derived no receipt from its charter agreement with NASUTRA. This
finding of fact rests on a rational basis, and hence must be sustained. Exhibits "E", "F," and
"G" positively show that the tramper vessel M/V "Gardenia" arrived in Iloilo on January 10,
1981 but found no raw sugar to load and returned to Japan without any cargo laden on
board. Exhibit "E" is the Clearance Vessel to a Foreign Port issued by the District Collector of
Customs, Port of Iloilo while Exhibit "F" is the Certification by the Officer-in-Charge, Export
Division of the Bureau of Customs Iloilo. The correctness of the contents of these documents
regularly issued by officials of the Bureau of Customs cannot be doubted as indeed, they
have not been contested by the petitioner. The records also reveal that in the course of the
proceedings in the court a quo, petitioner hedged and hawed when its turn came to present
evidence. At one point, its counsel manifested that the BIR examiner and the appellate
division of the BIR have both recommended the approval of private respondent's claim for
refund. The same counsel even represented that the government would withdraw its
opposition to the petition after final approval of private respondents' claim. The case
dragged on but petitioner never withdrew its opposition to the petition even if it did not
present evidence at all. The insincerity of petitioner's stance drew the sharp rebuke of
respondent court in its Decision and for good reason. Taxpayers owe honesty to government
just as government owes fairness to taxpayers.

In its last effort to retain the money erroneously prepaid by the private respondent,
petitioner contends that private respondent suppressed evidence when it did not present its
charter agreement with NASUTRA. The contention cannot succeed. It presupposes without
any basis that the charter agreement is prejudicial evidence against the private
respondent. 10 Allegedly, it will show that private respondent earned a charter fee with or
without transporting its supposed cargo from Iloilo to Japan. The allegation simply remained
an allegation and no court of justice will regard it as truth. Moreover, the charter agreement
could have been presented by petitioner itself thru the proper use of a subpoena duces
tecum. It never did either because of neglect or because it knew it would be of no help to
bolster its position. 11 For whatever reason, the petitioner cannot take to task the private
respondent for not presenting what it mistakenly calls "suppressed evidence."

We cannot but bewail the unyielding stance taken by the government in refusing to refund
the sum of ONE HUNDRED SEVEN THOUSAND ONE HUNDRED FORTY TWO PESOS AND
SEVENTY FIVE CENTAVOS (P107,142.75) erroneously prepaid by private respondent. The tax
was paid way back in 1980 and despite the clear showing that it was erroneously paid, the
government succeeded in delaying its refund for fifteen (15) years. After fifteen (15) long
years and the expenses of litigation, the money that will be finally refunded to the private
respondent is just worth a damaged nickel. This is not, however, the kind of success the
government, especially the BIR, needs to increase its collection of taxes. Fair deal is expected
by our taxpayers from the BIR and the duty demands that BIR should refund without any
unreasonable delay what it has erroneously collected. Our ruling in Roxas v. Court of Tax
Appeals 12 is apropos to recall:

The power of taxation is sometimes called also the power to destroy.

Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the "hen that lays the golden egg."
And, in order to maintain the general public's trust and confidence in
the Government this power must be used justly and not treacherously.

IN VIEW HEREOF, the assailed decision of respondent Court of Tax Appeals, dated September
15, 1983, is AFFIRMED in toto. No costs.

SO ORDERED.
13