G.R. No.

L-31364 March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional
Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners,
vs.
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V,
and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents.

Jaime Araneta in his capacity as Regional Director of BIR filed a Motion for allowance of claim against the
estate of Luis D. Tongoy. The claim represents the indebtedness to the Government of the late Luis D.
Tongoy for deficiency income taxes in the total sum of P3,254.80. The Administrator opposed the motion
solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. The motion
was denied by respondent Judge Fernandez and a motion for reconsideration was also denied.
Petitioners filed an appeal on certiorari contending that the claim for taxes was filed beyond the period
provided in Section 2, Rule 86 of the Rules of Court and that the same was barred by the said provision.

Issue: Whether or not the Government through BIR can claim unpaid taxes from a decedent’s estate

Ruling: In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that
"taxes assessed against the estate of a deceased person ... need not be submitted to the committee on
claims in the ordinary course of administration. In the exercise of its control over the administrator, the
court may direct the payment of such taxes upon motion showing that the taxes have been assessed
against the estate."

The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of
exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of
the Government and their prompt and certain availability are imperious need.

Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected.
To safeguard such interest, neglect or omission of government officials entrusted with the collection of
taxes should not be allowed to bring harm or detriment to the people, in the same manner as private
persons may be made to suffer individually on account of his own negligence, the presumption being that
they take good care of their personal affairs. This should not hold true to government officials with respect
to matters not of their own personal concern. This is the philosophy behind the government's exception,
as a general rule, from the operation of the principle of estoppel. Wherefore the decision appealed from is
reversed
G.R. No. 106611 July 21, 1994
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
COURT OF APPEALS, CITYTRUST BANKING CORPORATION and COURT OF TAX APPEALS,
respondents.

Citytrust filed a claim for refund with BIR in the amount of P19,971,745.00 representing the alleged
overpayment of income tax as computed in its final income tax return for the calendar year ending
December 31, 1985. To interrupt the prescriptive period, Citytrust filed a petition with the Court of Tax
Appeals, claiming the refund of its income tax overpayments for the years 1983, 1984 and 1985. The
OSG in their answer contended that the claim of Citytrust from 1983 was not properly documented and
that even if they are entitled for such claim the right to claim the same has prescribed with respect to
income tax payments prior to August 28, 1984, pursuant to Sections 292 and 295 of the National Internal
Revenue Code of 1977, as amended, since the petition was filed only on August 28, 1986. The case was
submitted for decision based solely on the pleadings and evidence submitted by herein private
respondent Citytrust because the petitioner failed to present evidence due to the failure of Tax
Credit/Refund Division of the BIR to transmit the records of the case, as well as the investigation report
thereon, to the Solicitor General. The petitioner filed a motion to suspend the proceedings but the same
was denied. The case was decided and the Tax court ruled in ordering BIR to refund the overpaid tax for
the year 1984 and 1985 only. Petitioner filed a motion for reconsideration contending that Citytrust has
an outstanding tax liability amounting to P56M in 1984. Both parties filed a motion for reconsideration
which was denied by the CA and the court affirmed the decision of CTA. Hence this petition.

Issue: Whether or not the state is bound to the mistakes committed by its agents

Ruling: It is a long and firmly settled rule of law that the Government is not bound by the errors
committed by its agents. In the performance of its governmental functions, the State cannot be estopped
by the neglect of its agent and officers. Although the Government may generally be estopped through the
affirmative acts of public officers acting within their authority, their neglect or omission of public duties as
exemplified in this case will not and should not produce that effect.

Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the Government
cannot and must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of the
nation through which the government agencies continue to operate and with which the State
effects its functions for the welfare of its constituents. The errors of certain administrative officers
should never be allowed to jeopardize the Government's financial position, especially in the case at bar
where the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced
just because of bureaucratic lethargy. Wherefore the Judgment of CA is hereby set aside and the case is
remanded to CTA
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

ALGUE INC received a letter from petitioner stating that it has delinquency of income taxes amounting to
P83,183.85 for the years 1958 and 1959. ALGUE filed a request for reconsideration to deduct P75,000
contending that it was a legitimate business expense used as promotional fees. The request was
received by the office of the petitioner and was duly stamped. A warrant of distraint and levy was
presented to ALGUE through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the
ground of the pending protest. 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. BIR informed ALGUE that they are 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. After 16 days ALGUE
filed a petition for review before the CTA. CTA ruled in favor of ALGUE and that the deduction was
legitimately paid by ALGUE for actual service rendered in the form of promotional fees. Hence this
petition.

Issue: 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

Ruling: 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. Admittedly, everything seemed to be informal. This arrangement
was understandable, however, in view of the close relationship among the persons in the family
corporation.

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. ACCORDINGLY, the appealed decision of the Court of Tax
Appeals is AFFIRMED in toto, without costs.
G.R. No. 124043 October 14, 1998
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION
OF THE PHILIPPINES, INC., respondents.

YMCA, a non-stock non-profit organization earned an income of P676,829.80 from leasing out a portion
of its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from
parking fees collected from non-members. CIR issued an assessment to YMCA amounting to
P415,615.01 as deficiency on income tax, expanded withholding tax and withholding tax on wage. YMCA
filed a letter of protest but it was denied by the CIR.YMCA filed a petition for review before CTA
contending that the income generated by the rents and parking fees were used to cover its operation and
maintenance. CTA ruled that the leasing of the property and parking fees collected are reasonably
incidental to and reasonably necessary for the accomplishment of the objectives of the YMCA. An appeal
by the CIR to CA reversed the decision of CTA. YMCA filed a motion for reconsideration before the CA
which reversed its earlier decision. Hence this petition.

Issue: Whether or not income derived from rentals of real property owned by YMCA is subject to income
tax

Ruling: Sec. 27 (NIRC). Exemptions from tax on corporations. — The following organizations shall not be
taxed under this Title in respect to income received by them as such —
xxx xxx xxx
(g) Civic league or organization not organized for profit but operated exclusively for the promotion of
social welfare;
(h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes,
no part of the net income of which inures to the benefit of any private stockholder or member;
xxx xxx xxx
Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character
of the foregoing organizations from any of their properties, real or personal, or from any of their activities
conducted for profit, regardless of the disposition made of such income, shall be subject to the tax
imposed under this Code. (as amended by Pres. Decree No. 1457)

Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in
interpretation in construing tax exemptions. Furthermore, a claim of statutory exemption from taxation
should be manifest and unmistakable from the language of the law on which it is based. Thus, the
claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken."

The phrase "any of their activities conducted for profit" does not qualify the word "properties." This makes
from the property of the organization taxable, regardless of how that income is used — whether for profit
or for lofty non-profit purposes. Verba legis non est recedendum, Where the law does not distinguish,
neither should we.

WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals dated September 28,
1995 and February 29, 1996 are hereby REVERSED and SET ASIDE.
G.R. No. 117359 July 23, 1998
DAVAO GULF LUMBER CORPORATION, petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.

Davao Gulf is a concessionaire with TLA granted by the DENR. They purchase mineral oils and diesel
from various oil companies which they use in their exploitation and operation. Oil companies paid their
specific taxes provided Sections 153 and 156 of the NIRC which were eventually passed to their
consumer Davao Gulf. Petitioner filed a claim for refund before the CIR in the amount of P120,825.11,
representing 25% of the specific taxes actually paid on the above-mentioned fuels and oils that were used
by petitioner in its operations as forest concessionaire. Davao Gulf contended that Section 5 of RA 1435
provides that whenever any oils mentioned above are used by miners or forest concessionaires in their
operations, twenty-five per centum of the specific tax paid thereon shall be refunded by the Collector of
Internal Revenue upon submission of proof of actual use of oils…. The refund was denied by the CIR,
hence, Davao filed a petition for review before the CTA which granted the petitioner a partial refund based
on the on rates deemed paid under RA 1435, and not on the higher rates actually paid by petitioner under
Art. 153 and 156 of the NIRC. Davao filed an appeal before the CA which affirms the decision of CTA.
Hence this petition.

Issue: Whether or not the refund must be computed in favour of the Davao Gulf’s claim

Ruling: Because taxes are the lifeblood of the nation, statutes that allow exemptions are construed
strictly against the grantee and liberally in favor of the government. Otherwise stated, any exemption from
the payment of a tax must be clearly stated in the language of the law; it cannot be merely implied
therefrom.

A tax cannot be imposed unless it is supported by the clear and express language of a statute; on the
other hand, once the tax is unquestionably imposed, "[a] claim of exemption from tax payments must be
clearly shown and based on language in the law too plain to be mistaken." Since the partial refund
authorized under Section 5, RA 1435, is in the nature of a tax exemption, it must be construed strictissimi
Juris against the grantee. Hence, petitioner's claim of refund on the basis of the specific taxes it actually
paid must expressly be granted in a statute stated in a language too clear to be mistaken. WHEREFORE,
the petition is hereby DENIED and the assailed Decision of the Court of Appeals is AFFIRMED.
G.R. No. 120880 June 5, 1997
FERDINAND R. MARCOS II, petitioner,
vs.
COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and
HERMINIA D. DE GUZMAN, respondents.

Petitioner is the eldest son of the late President Marcos who questions the assessment of the CIR and
collecting through the summary remedy of Levy on Real Properties, estate and income tax delinquencies
upon the estate and properties of his father, despite the pendency of the proceedings on probate of the
will of the late president. Marcos filed a petition for certiorari and Prohibition with an application for writ of
preliminary injunction and/or temporary restraining order before the CA against the issuance of CIR of the
notice of Levy on Real Property and sale by public auction of the said properties. CA ruled the deficiency
assessments for estate and income tax of the late President already become final and unappealable, and
may thus be enforced by the summary remedy of levying upon the properties, hence this petition. Marcos
contended that the pending probate proceeding puts the properties in custodia legis of the probate court
to the exclusion of all other courts and administrative agencies. BIR argued that the sate’s authority to
collect internal revenue taxes is paramount.

Issue: Whether or not the State can collect taxes on the estate of the deceased despite the pending
probate proceeding

Ruling: The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52
Phil 803), relied upon by the petitioner-appellant is good authority on the proposition that the court having
control over the administration proceedings has jurisdiction to entertain the claim presented by the
government for taxes due and to order the administrator to pay the tax should it find that the assessment
was proper, and that the tax was legal, due and collectible.

Thus, it was in Vera vs. Fernandez that the court recognized the liberal treatment of claims for taxes
charged against the estate of the decedent. Such taxes, we said, were exempted from the application of
the statute of non-claims, and this is justified by the necessity of government funding, immortalized in the
maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae — taxes are the
sinews of the state.

It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the
collection of taxes, is of paramount importance for the sustenance of government. Taxes are the lifeblood
of the government and should be collected without unnecessary hindrance. However, 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. [Marcos II vs. Court of Appeals, 273 SCRA 47(1997)]

IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition.

G.R. Nos. L-49839-46 April 26, 1991
JOSE B. L. REYES and EDMUNDO A. REYES, petitioners,
vs.
PEDRO ALMANZOR, VICENTE ABAD SANTOS, JOSE ROÑO, in their capacities as appointed and
Acting Members of the CENTRAL BOARD OF ASSESSMENT APPEALS; TERESITA H. NOBLEJAS,
ROMULO M. DEL ROSARIO, RAUL C. FLORES, in their capacities as appointed and Acting
Members of the BOARD OF ASSESSMENT APPEALS of Manila; and NICOLAS CATIIL in his
capacity as City Assessor of Manila, respondents.

J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo which they
lease to their tenants for P300 monthly. Republic Act No. 6359 prohibiting for one year from its effectivity,
an increase in monthly rentals in properties used for dwelling where such rental does not exceed P300 a
month but allowing an increase in rent by not more than 10% thereafter. The said Act also suspended
paragraph (1) of Article 1673 of the Civil Code for two years from its effectivity thereby disallowing the
ejectment of lessees upon the expiration of the usual legal period of lease. P. D. No. 20 amended R.A.
No. 6359 making the prohibition absolute and suspending the said provision indefinitely excepting leases
with definite period. The City Assessor re-classified and reassessed the property of the petitioner which
increased their tax rate prompting them to file a Memorandum of Disagreement with the BTAA contending
that reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional".
The BTAA denied the Memorandum of Disagreement, hence, the Reyeses appealed to CBAA. CBAA
conducted an ocular inspection of the property and found out that some of the properties were below
street level affected by tides. CBAA affirmed the decision of BTAA with modification allowing a 20%
reduction on the market value of the properties affected by tides. A motion for reconsideration by the
petitioners was denied by the CBAA, hence, this petition. Petitioners contended that the Honorable Board
erred in adopting the "comparable sales approach" method in fixing the assessed value of appellants'
properties.

Issue: Whether or not the tax imposed by the BTAA is excessive

Ruling: The power to tax “is an attribute of sovereignty”. In fact, it is the strongest of all the powers of
government. But for all its plenitude, the power to tax is not unconfined as there are restrictions.
Adversely effecting as it does property rights, both the due process and equal protection clauses of the
Constitution may properly be invoked to invalidate in appropriate cases a revenue measure. If it were
otherwise, there would be truth to the 1903 dictum of Chief Justice Marshall that “the power to tax
involves the power to destroy.” The web or unreality spun from Marshall’s famous dictum was brushed
away by one stroke of Mr. Justice Holmes’ pen, thus: “The power to tax is not the power to destroy while
this Court sits.” “So it is in the Philippines.” (Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v.
Commissioner of Internal Revenue, 139 SCRA 439 [1985]). [Reyes vs. Almanzor, 196 SCRA 322(1991)])

Verily, taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. However, 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 taxations, which is the
promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue, Inc., et
al., 158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social
justice should not now be penalized by the same government by the imposition of excessive taxes
petitioners can ill afford and eventually result in the forfeiture of their properties. [Reyes vs. Almanzor, 196
SCRA 322(1991)]

PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public
respondents are REVERSED and SET ASIDE; and (e) the respondent Board of Assessment Appeals of
Manila and the City Assessor of Manila are ordered to make a new assessment by the income approach
method to guarantee a fairer and more realistic basis of computation.
SO ORDERED.