SUMMARY OF SIGNIFICANT SUPREME COURT CASES (AUGUST- OCTOBER 2009)

By: Atty. Dianna Lynne Sin Baysac

1. Prohibited Double Taxation

Section 21 of the Manila Tax Ordinance No. 7794 exempts from payment of local business tax
imposed by said section businesses already paying such tax under other sections of the same
ordinance like the taxpayer subject to business tax under Section 14. The said proviso, however, was
deleted by Tax Ordinance No. 7988 and No. 8011. Said exempting proviso was precisely included in
said section to avoid double taxation as prohibited under Section 143 (h) of the Local Government
Code (LGC). Tax Ordinance No. 7988 and No. 8011 are, therefore, hereby declared null and void
and without legal effect. The City of Manila, et al., v. Coca-Cola Bottlers Philippines, G.R.
181845, August 12, 2009.

2. Section 111 (A) of the new NIRC providing for transitional input tax credits to taxpayers
not previously covered under the VAT law is clear and unambiguous to cover goods and
properties.

Section 100 (now 105) defines “good or properties” to include “real properties held primarily for
sale to costumers or held for lease in the ordinary course of business.” The statutory definition
leaves no room for doubt. Thus, having been defined, the term “goods” as used in Section 105 (now
111(A)) of the same Code could not have a different meaning. xxx As mandated by Article 7 of the
Civil Code, an administrative rule or regulation, to be valid, must conform and not contravene the
law on which it is based. It cannot modify, expand, or subtract from the law it is intended to
implement. Any rule that is not consistent with the statute itself is null and void. While
administrative agencies, such as the Bureau of Internal Revenue, may issue regulations to implement
statutes, they are without authority to limit the scope of the statute to less than what it provides, or
extend or expand the statute beyond its terms, or in any way modify explicit provisions of the law.
Indeed, a quasi-judicial body or an administrative agency for that matter cannot amend an act of
Congress. Hence, in case of a discrepancy between the basic law and an interpretative or
administrative ruling, the basic law prevails.

Section 4.105-1 of RR 7-95, which limits “goods” to improvements on the real property while
excludes the real properties themselves is, therefore, struck down for being contradictory to the Tax
Code. Fort Bonifacio Development Corp. v. Commissioner of Internal Revenue, G.R. 158885
and 170680. October 2, 2009.

3. Special savings deposit (SSD) accounts which have the same features as a time deposit
account, i.e., a fixed term in order to earn a higher interest rate, is subject to the
Documentary Stamp Tax (DST) imposed under Section 180 (now 179) of the 1997 National
Internal Revenue Code.
Petitioner’s claim that their Savings Plus Deposit is a regular savings account since it is evidenced by
a passbook, hence, not subject to DST is untenable. A deposit account which has the same features
as a time deposit account, i.e., a fixed term in order to earn a higher interest rate, is subject to the
Documentary Stamp Tax imposed under Section 180 of the 1997 National Internal Revenue Code.
A passbook representing an interest-earning deposit account issued by a bank qualifies as a
certificate of deposit drawing interest. A document to be deemed a certificate of deposit requires no
specific form as long as there is some written memorandum that the bank accepted a deposit of a
sum of money from a depositor. What is important and controlling is the nature or meaning
conveyed by the passbook and not the particular label or nomenclature attached to it, inasmuch as
substance, not form, is paramount. Hence, whether or not SSDs are subject to documentary stamp
tax is dependent on the nature and specific features thereof. It is thus conceded that if the SSDs are
more akin to a time deposit account then the same would be subject to documentary stamp tax.
However, if the SSDs are more akin to a regular savings deposit account then the same would not
be subject to documentary stamp tax. China Banking Corporation v. Commissioner of Internal
Revenue, G.R. 172359. October 2, 2009.

4. The certificate of sale issues only upon approval of the executive judge who must, in the
interest of fairness, first determine that the requirements for extrajudicial foreclosure have
been strictly followed. Hence, the reckoning period of the redemption period, and therefore
the collection of taxes, commences only from this period.

The position of the CIR that the redemption period should be reckoned from the date of the
auction sale for, otherwise, the taxing authority would be left at the mercy of the executive judge
who may unnecessarily delay the approval of the certificate of sale and thus prevent the early
payment of taxes, is untenable.

Besides, on August 15, 2008, the Bureau of Internal Revenue issued Revenue Memorandum Circular
58-2008 clarifying among others, the time within which to reckon the redemption period of real
estate mortgages reads: “For purposes of reckoning the one-year redemption period in the case of
individual mortgagors, or the three-month redemption period for juridical persons/mortgagors, the
same shall be reckoned from the date of the confirmation of the auction sale which is the date when
the certificate of sale is issued.” Commissioner of Internal Revenue v. United Coconut Planters
Bank, G.R. 179063. October 23, 2009.