TaxJurisprudenceBriefer

1 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r
TABLE OF CONTENTS
TOPIC ONE – GENERAL PRINCIPLES OF TAXATION (PAGE 7)

G.R. NO. AND DATE CASE TITLE DIGESTED BY:
G.R. No. 199669, April 25, 2017 Southern Luzon Drug Corp. v. DSWD Arcayos
G.R. No. 119286, October 13, 2004 Paseo Realty v. CA Archival
G.R. No. 183137, April 10, 2013 Pelizloy Realty v. Benguet Bautista
G.R. No. 175356, December 3, 2013 Refer to: Concurring and Dissenting Opinion of Leonen of the Manila Memorial Park v.
Buenaventura
DSWD case
G.R. No. 185371, December 8, 2010 CIR v. Metro Star Caballes
G.R. Nos. L-49839-46, April 26, 1991 Reyes v. Almanzor David
G.R. No. L-31156, February 27, 1976 Pepsi Cola Bottling v. Municipality of Tanauan Emilio
G.R. No. 75697, June 19, 1987 Tio v. Videgram Gingoyon
GR No 166006, March 14 2008 Planters v. Fertiphil Halapan
G.R. No. 159647, April 15, 2005 CIR v. Central Luzon Corp Javier
G.R. No. 166494, June 29, 2007 Carlos Superdrug v. DSWD Jorda
G.R. No. 175356, December 3, 2013 Manila Memorial Park v. Sec of DSWS Macaraya
G.R. No. L-10405, December 29, 1960 Pascual v. Secretary of Public Works, et al Buenaventura
G.R. No. L-7859, December 22, 1955 Lutz v. Araneta Piñol
G.R. No. 210191, March 4, 2019 NPC v. Province of Pangasinan Caballes
G.R. No. 194388, November 7, 2018 Metropolitan Waterworks & Sewerage System v. Quezon City Buenaventura
G.R. No. 215427, December 10, 2014 PAGCOR v. BIR Quitara
G.R. No. 177387, November 9, 2016 CIR v. PAGCOR Reserva
G.R. No. 175772, June 5, 2017 Mitsubishi Corp v. CIR Roque
G.R. No. 195909, September 26, 2012 CIR v. St Luke’s Romano-Weigel
G.R. No. L-39086, June 15, 1988 Abra Valley v. Aquino Salvador
G.R. No. L-9637, April 30, 1957 American Bible Society v. City of Manila Serenado
G.R. No. 152904, June 8, 2007 City Assessor of Cebu City v. Association of Benevola de Cebu Sola

G.R. No. 215383, March 8, 2017 Jacinto-Henares v. St Paul College (Resolution) Solajes
GR 196596, November 9, 2016 CIR v. DLSU Tagalog
G.R. No. 160756, March 9, 2010 Chamber of Real Estate v. Romulo Tan
G.R. No. L-45987, May 5, 1939 People v. Cayat Villanueva
G.R. No. 160756, March 9, 2010 Associations’ Inc v. Romulo Villacarlos
G.R. No. L-23794, February 17, 1968 Ormoc Sugar Co v. Conejos Yang
G.R. No. 127410, January 20, 1999 Tiu v. CA Arcayos
G.R. No. 169507, January 11, 2016 Air Canada v. CIR Archival
G.R. No. 203160, January 24, 2018 CIR v. Covanta Energy Philippine Holding Bautista
TOPIC TWO – INCOME TAXATION – GENERAL OVERVIEW (PAGE 37)

G.R. No. 199802, April 10, 2019 Mandanas et al v. Ochoa Carreon
G.R. No. 184450, January 24, 2017 Soriano v. Secretary of Finance (en banc) Chio
G.R. No. 12287, August 7, 1918 Madrigal v. Rafferty David
G.R. No. 167689, July 19, 2011 CIR v. Filinvest Development Corp Gingoyon
G.R. No. 156305, February 17 2003 Baier-Nickel v. CIR Halapan
G.R. No. 153793, August 29, 2006 CIR v. Baier-Nickel Javier
G.R. No. 137377, December 18, 2001 CIR v. Marubeni Corporation Jorda
G.R. No. L-24248, July 31, 1974 Tuazon v. Lingad Macaraya
G.R. No. L-21108, November 29, 1966 Republic v. De la Rama Piñol
G.R. No. 188497, April 25, 2012 CIR v. Pilipinas Shell Petroleum Corp Quitara
G.R. No. 193007, July 19, 2011 Renato Diaz and Aurora Timbol v. Secretary of Finance and CIR Reserva
GR No. 208731, January 27, 2016 Philippine Amusement and Gaming Corp v. BIR Roque
G.R. No. 178788, September 29, 2010 United Airlines v. CIR Salvador
G.R. Nos. 179045-46, August 25, 2010 CIR v. Smart Communication Serenado
G.R. No. 162175, June 28, 2010 Miguel G. Osorio Pension Foundation, Inc. v. CA and CIR Sola

TOPIC THREE – INCOME TAXATION FOR INDIVIDUALS (PAGE 53)
G.R. No. 197117, April 10, 2013 First Lepanto Taisho Ins Corp v. CIR Solajes
G.R. No. 167679, July 22, 2015 ING Bank NV v. CIR Tagalog
G.R. No. 198756, January 13, 2015 Banco de Oro v. Republic of the Philippines Tan
G.R. No. 205428, June 7, 2017 Republic v. Spouses Salvador Villacarlos
G.R. No. 198756, August 16, 2016 Banco de Oro v. Republic (en banc) Villanueva
G.R. No. 213446, July 3, 2018 Confederation for Unity, Recognition and Advancement of Government Employees
Serenado
(COURAGE) v. CIR
TOPIC FOUR – INCOME TAXATION FOR CORPORATIONS (PAGE 60)

G.R. No. L-19392, April 14, 1965 Howden v. CIR Solajes
G.R. No. L-9996, October 15, 1957 Evangelista et al v. CIR Arcayos
G.R. No. L-68118, October 29, 1985 Obillos, et al v. CIR Archival
CTA Case No. 8382, June 3, 2014 Officemetro Philippines Inc. v. CIR Bautista
G.R. No. 188497, February 19, 2014 CIR v. Pilipinas Shell Petroleum Corp Buenaventura
G.R. No. 188550, August 19, 2013 Deutsche Bank-AG Manila Branch v. CIR Caballes
G.R. No. 143672, April 24. 2003 CIR v. General Foods (Phil.) Inc. Carreon
G.R. No. L-19537, May 20, 1965 The Late Lino Gutierrez substituted by Andrea C. vda. De Gutierrez et al v. Collector of Chio
internal Revenue
G.R. No. 172231, February 12, 2007 CIR v. Isabela Cultural Corp David
G.R. No. 173373, July 29, 2013 H. Tambunting Pawnshop Inc. v. CIR Emilio
G.R. No. L-21520, December 11, 1967 Plaridel Surety and Insurance Company v. CIR Gingoyon
GR No. 118794, May 8 1996 Philippine Refining Company (now known as Unilever) v. CA Halapan
G.R. No. 125508, July 19, 2000 China Banking Corporation v. CA, CIR and CTA Javier

G.R. No. 148083, July 21, 2006 CIR v. Bicolandia Drug Corp Jorda
G.R. Nos. L-12010 and L-12113, Kuenzle & Streiff Inc. v. Collector of Internal Revenue Macaraya
October 20, 1959
G.R. Nos. 106949-50, December 1, Paper Industries Corp of the Philippines v. CA. CIR and CTA Piñol
1995
G.R. No. L-31305, May 10, 1990 Hospital de San Juan de Dios, Inc. v. CIR Quitara
G.R. No. 159610, June 12, 2008 CIR v. Central Luzon Drug Corporation Reserva
G.R. No. 179259, September 25, 2013 CIR v. Philippine Airlines Inc. Romano-Weigel
TOPIC FIVE – ACCOUNTING PERIOD, METHODS OF ACCOUNTING, TAX RETURNS AND PAYMENT OF TAX (PAGE 78)
G.R. No. L-19865, July 31, 1965 Maria Carla Pirovano v. CIR Roque
G.R. No. 159991, November 16, 2006 Carmelino F. Pansacola v. CIR Salvador
G.R. No. L-24059, November 28, 1969 CM Hoskins & Co, Inc. v. CIR Serenado
G.R. No. 15014, October 2, 1920 Jose Ledesma v. CIR and the Provincial Treasurer of Occidental Negros Sola
G.R. No. L-28508-9, July 7, 1989 Esso Standard Eastern Inc. v. CIR Solajes
G.R. No. L – 12798, May 30, 1960 Visayan Cebu Terminal Co, Inc. s. CIR Tagalog
G.R. No. L-16626, October 29, 1966 CIR v. Carlos Palanca, Jr. Tan
G.R. No. 148187, April 16, 2008 Philex Mining Corp v. CIR Villacarlos
G.R. No. L-21551, September 30, Fernandez Hermanos, Inc. v. CIR and CTA
Villanueva
1969
G.R. Nos L-18843 and L-18844, Consolidated Mines, Inc. v. CTA and CIR
Yang
August 29, 1974
G.R. No. L-25043, April 26, 1968 Antonio Roxas, Eduardo Roxas and Roxas y Cia v. CTA and CIR Arcayos
G.R. No. L-9996, October 15, 1957 Eufemia Evangelista et al v. CIR and CTA Archival
G.R. No. L-19293, April 14, 1965 Alexander Howden & Co. LTD, H.G. Chester & Others, et al. v. Collector of Internal
Bautista
Revenue
G.R. No. 76573, September 14, 1989 Marubeni Corp v. CIR and CTA Buenaventura

G.R. No. 160756, March 9, 2010 Chamber of Real Estate and Builders’ Associations, Inc. v. The Hon. Executive Secretary
Caballes
Alberto Romulo
G.R. No. L-68375, April 15, 1988 CIR v. Wander Philippines, Inc. and CTA Carreon
G.R. No. 108067, January 20, 2000 Cyanamid Philippines, Inc. v. CA, CTA and CIR Chio
TOPIC SIX: DEPARTMENT OF FINANCE OPINIONS (PAGE 95)

DOF OPINION NO. SUBJECT DIGESTED BY:
DOF Opinion No. 012-2018 Re: Review of BIR Ruling No. 508-12 dated 3 August 2012 David
DOF Opinion No. 001-2019 Request for Review of BIR ITAD Ruling No. 070-2018 Emilio
DOF Opinion No. 002 - 2019 Request for Review of BIR Ruling No. ITAD 094-2018 Gingoyon
DOF Opinion No. 003-2019 Request for Review of BIR Ruling No. ITAD 140-12 Halapan
DOF Opinion No. 004-2019 Request for Review of BIR Ruling No. 174-2017 Javier
DOF Opinion No. 005-2019 Request for Review of BIR Ruling No. 755-2018 Jorda
DOF Opinion No. 006-2019 Request for Review of BIR Ruling No. ITAD 108-2018 Macaraya
DOF Opinion No. 007-2019 Request for BIR International Tax Affairs Division Ruling No. ITAD 048-18 Piñol
DOF Opinion No. 008-2019 Request for Review of BIR Ruling No. ITAD 010-18 Reserva
DOF Opinion No. 009-2019 Request for Review of BIR Ruling No. 624-2018 dated 11 April 2018 Romano-Weigel
DOF Opinion No. 0010-2019 Request for Review of the Bureau of Internal Revenue Ruling No. ITAD 003-15 Roque
DOF Opinion No. 011-2019 Request for Review of BIR Ruling No. ITAD 126-14 Salvador
DOF Opinion No. 012-2019 Request for Review of BIR Ruling No. 652-2018 Sola
DOF Opinion No. 013-2019 Request for Review of BIR Ruling No. 026-2016 Solajes
DOF Opinion No. 014-2019 Request for Review of BIR Ruling No. 242-2019 Tan
DOF Opinion No. 015-2019 Request for Review of BIR Ruling No. ITAD 169-2013 Villanueva
DOF Opinion No. 016-2019 Request for Review of BIR Certificate of Tax Exemption No. 256-2019 Villacarlos
DOF Opinion No. 017-2019 Request for Review of BIR Ruling No. 296-2014 Yang
DOF Opinion No. 018-2019 Request for Review of BIR Ruling No. 0505-2019 Arcayos
DOF Opinion No. 001-2020 Request for Review of BIR ITAD Ruling No. 019-19 Bautista

TOPIC ONE: GENERAL PRINCIPLES
CASE TITLE PRINCIPLE SUMMARY OF FACTS ISSUE RULING
Southern Luzon The grant of 20% Petitioner Southern Luzon Drug Whether the RA 9257 is No. The Congress, by enacting such law,
Drug Corp. v. discount to senior Corporation is a domestic corporation unconstitutional for used taxation as an implement of police
DSWD | G.R. No. citizens and PWDs is engaged in the business of drugstore being confiscatory of power. The right to profit is not a vested
199669, April 25, not an exercise of the operation in the Philippines while the their right to their right or an entitlement that has accrued
2017 power of eminent respondents are government agencies, profit on the person or entity such that its
domain but of police offices and bureau tasked to promulgate invasion or deprivation warrants
power; the latter being implementing rules and regulations for the compensation. “In the exercise of police
the most essential, effective implementation R.A. Nos. 9257 and power, property rights of private
insistent and the least 9442. individuals are subjected to restraints
limitable of powers, and burdens in order to secure the
extending as it does to Petitioner filed a petition to prohibit the general comfort, health, and prosperity
all the great public implementation of Republic Act (R.A.) No. of the State."
needs. 9257 or the "Expanded Senior Citizens Act
of 2003", particularly the granting of 20% The concurrence of lawful subject and
discount on the purchase of medicines by lawful means exists hence, the law is a
senior citizens and persons with disability legitimate exercise of police power. It is
(PWD) and treating them as tax deduction the bounden duty of the State to care for
instead of tax credit. They claimed that it is the elderly and provide aid for the
confiscatory as it affects the profitability of disabled persons.
their business.

Paseo Realty v. CA | Tax refunds, like tax Paseo Realty is a domestic corporation Whether Paseo Realty No. Paseo Realty’s failure to present
G.R. No. 119286, exemptions, are engaged in the least of two (2) parcels of is entitled to a refund sufficient evidence to prove its claim for
October 13, 2004 construed against the land. It filed its ITR for the year 1989. It of its excess taxes paid refund is fatal to its case. It has the
taxpayer. The claimant thereafter filed with CIR a claim for refund in 1989 or be allowed burden of proof, as a claimant, to
bears the burden of of its excess creditable withholding in 1989 to credit its tax establish factual basis of its claim for tax
proof to establish and income taxes for 1990. liabilities for 1990 credit or refund.
factual basis of his or
her claim for tax credit Paseo Realty also filed with CTA a petition Here, Paseo Realty combined its 1988
or refund. for review praying that the refund be and 1989 tax credits and applied its 1990
released and applied to its 1990 income tax tax due against the total tax credits, and
liability. CTA and CA denied the petition and not against its creditable taxes for 1989.
motion for reconsideration respectively.
Section 69 of the NIRC (now Section 76)
provides that the carrying forward of any
excess or overpaid income tax for a given
taxable year is limited to the succeeding
taxable year only. Paseo Realty’s
entitlement to a refund could have been
avoided had it presented its ITR for 1990.
Pelizloy v. Benguet | A “place of Pelizloy Realty Corp. owns Palm Grove Whether the tax Yes. The tax ordinance is ultra vires.
G.R. No. 183137, amusement” as Resort, a recreation facility located in Asin, ordinance is ultra vires
April 10, 2013 defined in the LGC Benguet, which consists of swimming pools, An LGU’s power of taxation is not
covers only those a spa, and function halls. The Province of inherent and is granted only by law. An
places where one goes Benguet approved a Tax Ordinance levying LGU’s authority to tax is construed in
to view a show or a 10% amusement tax on gross receipts strictissimi against it.
performance. Resorts, from admissions to “resorts, swimming
etc., are not places of pools, bath houses, hot springs, and tourist LGUs may impose percentage tax, if such
amusement and thus spots.” Pelizloy assailed this ordinance with falls within the exception, such as if the
cannot be subject to the argument that it was ultra vires, institution taxed is a place of
percentage tax. following Sec. 133(i) of the LGC which amusement.

prohibits an LGU from levying percentage Resorts, etc. are not covered by the
taxes, albeit with exception. Benguet argues exception. They are not places of
that its tax ordinance falls under the “amusement,” which may be subjected
exception because Pelizloy is a “place of to percentage tax. Sec. 131(c) of the LGC
amusement.” which defines a place of “amusement” as
where one goes to entertain oneself by
viewing a show or performance.
By the principle of ejusdem generis,

resorts, etc. are not places of
amusement. Thus, the tax ordinance is
ultra vires.
Concurring and There is no restriction In the case of Manila Memorial vs. DSWD, In his dissenting opinion, Justice Leonen
Dissenting Opinion in the law for Manila Memorial assailed the explains, through illustrative calculations,
of Leonen of the businesses tao constitutionality of the grant of a senior how businesses, despite being imposed
Manila Memorial attempt to recover the citizens’ discount, as mandated by RA 7432. with a bigger burden by somehow
Park vs. DSWD case | same amount of The same law revised its tax treatment from shouldering the discounts to be granted
G.R. No. 175356, profits for the tax credit to tax deduction. It was assailed to senior citizens, can recoup
December 3, 2013 businesses affected by on the ground of unjust taking. But in such opportunity losses by higher pricing,
RA 7432 through case, the Supreme Court ultimately ruled since the law does not control the price
pricing its goods that the mandate granting such discount of the goods. Further, while agreeing
higher. was an exercise of police power, as it has that such was an exercise of police power
general welfare as its object. As an exercise and power of taxation, Justice Leonen
of police power, the government then had does not believe that the power of
no obligation of just compensation to eminent domain was involved in this law.
affected businesses.
CIR v. Metro Star | The sending of a pre- A revenue officer was tasked to examine Whether due process No. While it is true that there is a
G.R. No. 185371, assessment notice is Metro Star’s books of accounts and records was observed in the presumption that the tax assessment was
December 8, 2010. part of the due for income tax purposes. After such review, issuance of the formal duly issued, this presumption is

process requirement said officer issued a formal assessment assessment notice disregarded if the taxpayer denies ever
in the issuance of a notice against Metro Star advising the latter against Metro Star having received a tax assessment from
deficiency tax that it is liable to pay P292,874.16 in the BIR. In such cases, it is incumbent
assessment, the deficiency taxes. Metro Star assailed the upon BIR to prove through competent
absence of which issuance of said notice arguing that due evidence that such notice was indeed
renders nugatory any process was not observed when it was not received by the taxpayer. The onus
assessment made by issued a pre-assessment notice. probandi was shifted to the BIR to prove
the tax authorities. Nevertheless, the CIR authorized the by contrary evidence that the Metro Star
issuance of a Warrant of Distraint and/or received the assessment. Therefore,
Levy against the properties of Metro Star. while "taxes are the lifeblood of the
Metro Star appealed to the CTA. government," the power to tax has its
limits, in spite of all its plenitude.
Panhandle Oil v. Laws of Mississippi provided that 'any Whether Panhandle Oil No. The states may not burden or
Mississippi | 277 U.S. The state may not person engaged in the business of is liable for the excise interfere with the exertion of national
218, May 14, 1928 burden or interfere distributor of gasoline, or retail dealer in tax imposed by the power or make it a source of revenue or
with the exertion of
gasoline, shall pay an excise tax of 1¢ per state of Mississippi take the funds raised or tax the means
national power or
gallon upon the sale of gasoline. used for the performance of federal
make it a source of
revenue or take the functions.
funds raised or tax the Panhandle Oil sued to recover taxes claimed
means used for the on account of sales made by petitioner to The petitioner's right to make sales to
performance of the United States for the use of its Coast the United States was not given by the
governmental Guard fleet in service in the Gulf of Mexico State and does not depend on state laws;
functions.
and its Veterans' Hospital at Gulfport. it results from the authority of the
national government under the
Petitioner defended on the ground that Constitution to choose its own means
these statutes, if construed to impose taxes and sources of supply. While Mississippi
on such sales, are repugnant to the federal may impose charges upon petitioner for
Constitution. the privilege of carrying on trade that is

subject to the power of the State, it may
not lay any tax upon transactions by
which the United States secures the
things desired for its governmental
purposes.
Reyes v. Almanzor Taxation should be

et. al., | GR. Nos. L- made in accordance Petitioners owned parcels of land which Whether the increase Taxes are the lifeblood of the
49839-46, April with law as any were leased and occupied by tenants. PD 20 in taxes, as a result of government and so should be collected
26,1992 arbitrariness will amended R.A. No. 6359, making absolute the reclassification and without unnecessary hindrance.
negate the very reason the prohibition to increase monthly rentals reassessment of the However, such collection should be
for government itself. below P300.00. Consequently, the value of the property, is made in accordance with law as any
petitioners were precluded from raising the valid arbitrariness will negate the very reason
rentals and from ejecting the tenants. The for government itself. It is necessary to
City Assessor of Manila re-classified and reconcile the conflicting interests of the
reassessed the value of the subject authorities and the taxpayers so that the
properties based on the schedule of market real purpose of taxation, which is the
values duly reviewed by the Secretary of promotion of the common good, may be
Finance. The revision entailed an increase in achieved. Consequently, it stands to
the corresponding tax rates, prompting reason that petitioners who are
petitioners to file a Memorandum of burdened by the government by its
Disagreement with the Board of Tax Rental Freezing Laws under the principle
Assessment Appeals, averring that the of social justice should not now be
reassessments made were "excessive, penalized by the same government by
unwarranted, inequitable, confiscatory and the imposition of excessive taxes

unconstitutional", considering that the taxes petitioners can ill afford and eventually
imposed exceeded the annual income result in the forfeiture of their properties.
derived from their properties.
Pepsi Cola Bottling Whether the assailed

v. Municipality of The power of taxation Pepsi-Cola Bottling Company challenges laws are valid Since the power to tax is plenary, the
Tanauan, | G.R. No. is purely legislative in the constitutionality of the power of legislative power to create political
L-31156, February nature which the taxation delegated to municipalities under corporations for purposes of local self-
27, 1976 Congress cannot the Local Autonomy Act (Republic Act No. government carries with it the power to
delegate either to the 2264, as amended, June 19, 1959). confer on such local governmental
executive or judicial agencies the power to tax. Under the
department of the It was stipulated by the parties that both 1975 constitution, local governments are
government without Ordinances Nos. 23 and 27 cover the same granted the autonomous authority to
infringing upon the subject matter and the production tax rates create their own sources of revenue and
theory of separation of imposed therein are the same. Municipal to levy taxes. Thus, it cannot be said that
powers. The Ordinance No. 23 levies and collects "from Section 2 of Republic Act No. 2264
exception, however, soft drinks producers and manufacturers a emanated from beyond the sphere of the
lies in the case of tax of one-sixteenth (1/16) of a centavo for legislative power to enact and vest in
municipal every bottle of soft drink corked." On the local governments the power of local
corporations to which other hand, Municipal Ordinance No. 27 taxation.
said theory does not levies and collects "on soft drinks produced
apply. or manufactured within the territorial
jurisdiction of this municipality a tax of ONE
CENTAVO (P0.01) on each gallon of volume
capacity.”

Tio v. Videogram | The power to impose This petition assails the constitutionality of
Whether the said law is No, the said law is not unconstitutional
G.R. No. 75697, June taxes is one so P.D. 1987 entitled “An Act Creating the unconstitutional because the power to tax is unlimited.
19, 1987 unlimited in force and Videogram Regulatory Board” with broad because the tax
so searching in extent, powers to regulate and supervise the imposed is harsh and The tax imposed by the DECREE is not
that the courts Videogram industry. oppressive, only a regulatory but also a revenue
scarcely venture to confiscatory, and in measure prompted by the realization
declare that it is Petitioner’s attack the constitutionality of restraint of trade that earnings of Videogram
subject to any the decree, among others, that Section 10 establishments of around P600 million
restrictions whatever, thereof, which imposes a tax of 30% on the per annum have not been subjected to
except such as rest in gross receipts payable to the local tax, thereby depriving the Government
the discretion of the government is a RIDER and the same is not of an additional source of revenue.
authority which germane to the subject matter thereof; and
exercises it. the tax imposed is harsh, confiscatory, The levy of the 30% tax is for a public
oppressive and/or in unlawful restraint of purpose. It was imposed primarily to
trade in violation of the due process clause answer the need for regulating the video
of the Constitution. industry, particularly because of the
rampant film piracy, the flagrant
violation of intellectual property rights,
and the proliferation of pornographic
video tapes.
Planters Product Inc The main purpose of Petitioner PPI and respondent Fertiphil are Whether the said levy The imposition of the levy was an
v. Fertiphil Corp. | GR police power is the both engaged in the importation and was an exercise of the exercise of the taxation power of the
No 166006, March regulation of a distribution of fertilizers, pesticides and taxation power of the state. While it is true that the power to
14 2008 behavior or conduct, agricultural chemicals. Marcos issued Letter state tax can be used as an implement of
while taxation is of Instruction (LOI) 1465, imposing a capital police power, the primary purpose of the
revenue generation. recovery component of Php10.00 per bag of levy was revenue generation. If the
The lawful subjects fertilizer. The levy was to continue until purpose is primarily revenue, or if
and means tests are adequate capital was raised to make PPI revenue is, at least, one of the real and
used to determine the financially viable. Fertiphil paid P6,689,144 substantial purposes, then the exaction is

validity of a law to FPA from 1985 to 1986. After the 1986 properly called a tax. Police power and
enacted under the Edsa Revolution, FPA voluntarily stopped the power of taxation are distinct
police power. The the imposition of the P10 levy. Fertiphil inherent power of the State and have
power of taxation is demanded from PPI a refund of the amount different tests for validity. Police power is
circumscribed by it remitted, however PPI refused. Fertiphil the power of the State to enact
inherent and filed a complaint for collection and legislation that may interfere with
constitutional damages, questioning the constitutionality personal liberty or property in order to
limitations. of LOI 1465, claiming that it was unjust, promote the general welfare, while the
unreasonable, oppressive, invalid and an power of taxation is the power to levy
unlawful imposition. taxes to be used for public purpose.
CIR v. Central Luzon The taxation power Respondent, a domestic corporation Whether Respondent is Yes. The privilege enjoyed by senior
Drug Corporation | can be used in primarily engaged in retailing of medicines entitled to a tax credit citizens does not come directly from the
G.R. No. 159647, implementing the and other pharmaceutical products, granted benefit which may be State, but rather from the private
April 15, 2005
power of eminent 20% sales discount to qualified senior deemed as just establishments. Accordingly, the tax
domain. Tax measures citizens on their purchases pursuant to RA compensation credit benefit granted to these
are “enforced 7432. establishments can be deemed as just
contributions exacted compensation for private property taken
on pain of penal Respondent filed its annual ITR and for public use.
sanctions" and "clearly declared therein net losses. Respondent
imposed for a public filed a claim for tax refund/credit arising The discounts would have formed part of
purpose." The power from the 20% sales discount granted. the gross sales of the private
to tax is a tool to establishments. The permanent
realize social justice, CTA ordered Petitioner to issue a Tax Credit reduction in their total revenues is a
public welfare, and Certificate in favor of Respondent. CA forced subsidy corresponding to the
equitable distribution affirmed the decision reasoning that RA taking of private property for public use
of wealth. 7432 required neither a tax liability nor or benefit.
payment of taxes by private establishments

prior to the availment of a tax credit. As a result of the 20% discount imposed
Moreover, such credit is not tantamount to by law, respondent becomes entitled to
an unintended benefit from the law, but just compensation. This term refers to
rather just compensation for the taking of both the issuance of a tax credit
private property for public use. certificate indicating the amount of the
discounts given and the promptness in
its release.
Carlos Superdrug v. The law is a legitimate The Expanded Senior Citizens Act changed Whether the new law is No, it is not unconstitutional, because
DSWD | G.R. No. exercise of police the former method in which establishments unconstitutional Art III Sec. 9 involves eminent domain,
166494, June power which, similar are compensated for granting discounts to while the new law entails the exercise of
29, 2007 to the power of senior citizens. The former law stated that police power. The law is a legitimate
eminent domain, has the amount of the discounts may be exercise of police power which, similar to
general welfare for its claimed as tax credit, which is a peso-for- the power of eminent domain, has
object. peso deduction from a taxpayer’s tax general welfare for its object. Police
liability. The new law now states that the power is not capable of an exact
amount of the discounts may now be definition, but has been purposely veiled
claimed as tax deduction from gross in general terms to underscore its
income. Petitioners now allege that the comprehensiveness to meet all
scheme devised by the new law does not exigencies and provide enough room for
completely reimburse the discount amount an efficient and flexible response to
granted by them to senior citizens, claiming conditions and circumstances, thus
that this scheme is unconstitutional because assuring the greatest benefits.
it infringes Art III Sec. 9 which provides that Accordingly, it has been described as
private property shall not be taken without "the most essential, insistent and the
just compensation. least limitable of powers, extending as it
does to all the great public needs." It is
"[t]he power vested in the legislature by
the constitution to make, ordain, and
establish all manner of wholesome and

reasonable laws, statutes, and
ordinances, either with penalties or
without, not repugnant to the
constitution, as they shall judge to be for
the good and welfare of the
commonwealth, and of the subjects of
the same."
For this reason, when the conditions so

demand as determined by the
legislature, property rights must bow to
the primacy of police power because
property rights, though sheltered by due
process, must yield to general welfare.
Manila Memorial Property rights of The petitioners assailed the constitutionality Whether Sec. 4 of RA No, the law is valid and constitutional.
Park v. Sec of DSWD individuals may be of Sec. 4 of RA 7432, as amended by RA 9257 and its IRR
| subjected to restraints 9257, and its implementing rules and (insofar as they provide The validity of the 20% discount and tax
G.R. No. 175356,
and burdens through regulations insofar as they allow that the 20% discount deduction scheme under RA 9257, as an
December 3, 2013
the exercise of police establishments to claim the 20% discount to senior citizens may exercise of police power has already
power of the State. given to senior citizens as a tax deduction be claimed as a tax been settled in Carlos Superdrug
The State may by arguing that it contravenes with Art. 3, deduction) are invalid Corporation, to wit:
interfere with personal Sec. 9 of the Constitution. and unconstitutional
liberty, property, “The law is a legitimate exercise of police
lawful businesses and Petitioners posit that the resolution of this power which, similar to ED, has general
occupations to case lies whether the 20% senior citizen welfare for its object. When the
promote the general discount is an exercise of police power (PP) conditions so demand as determined by
welfare as long as the or eminent domain (ED). the legislature, property rights must bow
interference is to the primacy of police power because

reasonable and not If it is PP, no just compensation is needed property rights, though sheltered by due
arbitrary. but if it is ED, the tax deduction scheme is process, must yield to general welfare...
unconstitutional as it is not a peso for peso
reimbursement and thus constitutes taking In the absence of evidence
of private property without payment of just demonstrating the alleged confiscatory
compensation. effect of the provision in question, there
is no basis for its nullification in view of
the presumption of validity which every
law has in its favor.”
Pascual v. Sec of The validity of laws are The petitioner sought to strike down a law, Whether the defect of The SC still struck down the law as invalid
Public Works | G.R. determined at the which appropriated funds for the the law has been cured for not being one of public purpose. The
No. L-10405, time of enactment. construction of a road. Petitioner contended by subsequent subsequent donation to the government
December 29, 1960 the road to be constructed only served the donation to the did not render the law valid. Congress is
benefit of a senator; thus, the law was government without power to appropriate public
unconstitutional, because it geared toward revenues for anything, but only for a
a private purpose, not public purpose. public purpose. At the time the law was
Eventually, the senator donated the passed, it was invalid for only serving
property to the government, which was private individual purposes.
averred to have cured the defect of the law.
The test of the constitutionality of a
statute requiring the use of public funds
is whether the statute is designed to
promote the public interest, as opposed
to the furtherance of the advantage of
individuals, although each advantage to
individuals might incidentally serve the
public.

Lutz v. Araneta |G.R.
No. L-7859, Considering that the Commonwealth Act No. 567 otherwise Whether the Sugar No, the subject act is valid and
December 22, 1955 Sugar Adjustment Act known as the Sugar Adjustment Act, was Adjustment Act is constitutional. Supreme Court took
aims to rehabilitate enacted to stabilize the sugar industry so as unconstitutional and judicial notice of the fact that sugar
and stabilize the sugar to prepare it for the eventuality of the loss void for being levied production is one of the great industries
industry, which greatly of the sugar products’ preferential position for private purpose in the country given that it provides
contributes to the in the United States market and the employment opportunities to thousands
State’s wealth, the imposition of export taxes. Section 2 thereof of people and greatly contributes to the
general welfare is provides for an increase of the existing tax state’s wealth. The Act has a regulatory
ultimately benefited on manufacture of sugar, on a graduated purpose which aims to rehabilitate and
and therefore the basis, on each picul of sugar, while section 3 stabilize the threatened sugar industry.
requirement of public thereof levies owners of land which are Therefore it was competent for the
purpose is satisfied. devoted to the cultivation of sugarcane. Legislature to find that the general
Petitioner argued that section 3 is void and welfare demanded that the sugar
unconstitutional as it is being levied for the industry should be stabilized in turn.
sugar industry exclusively, which in Moreover, it is inherent in the power to
petitioner’s position is not a public purpose. tax that a state be free to select the
subjects of taxation.

NPC v. Province of The government- NPC, a GOCC mandated to undertake Whether NPC has legal No. Real property tax liability rests on the
Pangasinan | G.R. owned or –controlled production and transmission of electricity personality & interest owner of the property or on the person
No. 210191, March corporation claiming nationwide, entered into an Energy to claim for such with the beneficial use thereof. In either
4, 2019. tax exemption and Conversion Agreement (ECA) with CEPA exemptions & case, the unpaid realty tax attaches to the
entitlement to the Pangasinan (aka Mirant; now Team Energy) privileges property but is directly chargeable
privilege must be the for construction, operation and against the taxable person who has
entity actually, directly, maintenance of Sual coal-fired thermal actual and beneficial use and possession
and exclusively using power station to NPC on a Build-Operate- of the property regardless of whether or
the real properties. Transfer (BOT) basis. not that person is the owner.
NPC was obliged to assume all real property A reading of the provisions of the parties’
taxes (RPT) but stopped paying for the 2nd agreement shows that NPC is yet to be
quarter of 2002 claiming exemption the owner nor the possessor or beneficial
pursuant to RA 7160, which prompted the user of the subject facilities; hence, it
Municipal Treasurer to send a notice of cannot be considered to have any legal
assessment. interest in the subject property to clothe
it with the personality to question the
NPC claimed that the machinery and assessment and claim for exemptions
equipment are actually, directly, and and privileges.
exclusively used for power generation, and
thus, makes them exempted from RPT.
Metropolitan Government Metropolitan Waterworks and Sewerage Whether MWSS was Yes. The SC ruled that MWSS was indeed
Waterworks & instrumentalities System was created by Congress through an exempt from tax exempt from tax, as it was expressly
Sewerage System v. exempt from any kind enactment of a law to control all the classified by President GMA that it was a
Quezon City | G.R. of local government waterworks in certain areas in Metro Manila. government instrumentality with
No. 194388 taxation because such It later claimed for exemption from real corporate power and that beneficial use
November 7, 2018 transfer of public property tax, by virtue of the Local of the properties were not extended to
funds would just result Government Code, which provides any taxable person.
from one government exemptions to government
pocket to another and instrumentalities. But this was contested as While the activities performed by MWSS

because there is also MWSS held the properties in its proprietary do not partake of the sovereign
no reason for local capacity. functions of the government and are
governments to tax purely private and commercial
national government undertakings, the corporate powers of
instrumentalities for MWSS cannot supplant the
rendering essential categorization was previously made by
public services to the Executive and Legislative Branches.
inhabitants of local
governments.
PAGCOR v. BIR |G.R. Franchise is a Petitioner filed a petition for Petition for Whether the extension When petitioner’s franchise was
No. 215427, legislative grant of a review on Certiorari and Prohibition seeking of petitioner’s extended on June 20, 2007 without
December 10, 2014 special privilege to a to declare the nullity of Section 1 of RA 9337 franchise under the revoking or withdrawing its tax
person. Thus, the insofar as it amends Sect. 27 {C} of RA 8424 same terms and
exemption, it effectively reinstated and
extension of or the NIRC by excluding petitioner from the conditions means a
reiterated all of petitioner’s rights,
petitioner’s franchise enumeration of GOCCs exempted from continuation of its tax
under the same terms liability for corporate income tax. exempt status with privileges and authority granted under
and conditions means respect to its income its Charter. Otherwise, Congress would
a continuation of its The petition is partially granted as Section 1 from gaming have painstakingly enumerated the
tax exempt status with of Republic Act No. 9337, amending Section operations rights and privileges that it wants to
respect to its income 27(c) of the National Internal Revenue Code withdraw, given that a franchise is a
from gaming of 1997, by excluding petitioner Philippine
legislative grant of a special privilege to
operations. Amusement and Gaming Corporation from
the enumeration of government-owned a person. Thus, the extension of
and controlled corporations exempted from petitioner’s franchise under the same
corporate income tax is valid and terms and conditions means a
constitutional, while BIR Revenue continuation of its tax exempt status with
Regulations No. 16-2005 insofar as it respect to its income from gaming
subjects PAGCOR to 10% VAT is null and
operations.
void.

In fine, we uphold our earlier ruling that
Section 1 of R.A. No. 9337, amending
Section 27(c) of R.A. No. 8424, by
excluding petitioner from the
enumeration of GOCCs exempted from
corporate income tax, is valid and
constitutional.
CIR v. PAGCOR | GR The Respondent, PAGCOR, has operated

177387, November The VAT law, RA 7716, under a franchise granted by the Congress. Whether VAT LAW(RA No. PAGCOR is exempt from payment of
9, 2016. being a general law In its charter it was expressly provided that 7716) repealed the VAT. First, a special law such as PD 18690
did not repeal theit is exempt from National or local taxation Charter of PAGCOR (PD can’t be modified or repealed by a
Charter of PAGCOR except a Franchise Tax of 5% of the gross 1869) where in effect subsequent general law like RA 7716 in
because it has been revenue or earning derived by the repealing such would the absence of any express provision in
ruled that a general Corporation. Now, the BIR issued several take away PAGCOR’s the latter law to that effect. Second, it is
law cannot repeal a assessments against the respondent for exemption of paying evident in RA 7716 that Congress has not
special law in the alleged deficiency of Value-Added tax national and local taxes intended to repeal PAGCOR’s privilege to
absence of express (VAT), final withholding tax on fringe enjoy the 5% franchise tax in lieu of all
provision in the benefits and expanded withholding tax. other taxes as it is provided in Sec 4 in
general law. Thus, the respondent filed a letter-protest reference with Sec 103 of the National
against assessment with the BIR to the Internal Revenue Code, which states that
petitioner, CIR, but the 180-day period transactions which are exempt from VAT
prescribed by law also lapsed without any are those exempt under special law.
action on the part of the CIR. This prompted Moreover, PAGCOR’S exemption from
the respondent to appeal to the Secretary of VAT has been settled in PAGCOR vs BIR
Justice which in its decision, declared, the where the court ruled that PAGCOR is

respondent to be exempt from the exempt from paying taxes because its
payments of taxes except the 5% franchise charter grants PAGCOR its exemption
tax as provided in its charter. from taxes.
Mitsubishi To "assume" means The governments of Japan and the Whether Mitsubishi Yes, the Mitsubishi Corp. is entitled to a
Corporation v. CIR | "to take on, or put Philippines executed an Exchange of Notes, Corporation – Manila refund. Japanese contractors and
GR No. 175772 June oneself in place of whereby the former agreed to extend a Branch is entitled to a nationals engaged in OECF funded
5, 2017 another as to an loan, for the implementation of the Calaca II refund projects in the Philippines shall not be
obligation or liability." Coal-Fired Thermal Power Plant Project required to shoulder the fiscal levies or
This means that the (Project). taxes associated with the project.
obligation or liability
remains, although the In the Exchange of Notes, the Philippine Therefore, the concerned Japanese
same is merely passed Government, by itself or through its contractors are entitled to claim for the
on to a different executing agency, undertook to assume all refund of all taxes paid and shouldered
person. Hence, The taxes imposed by the Philippines on by them relative to the conduct of the
Constitutional Japanese contractors engaged in the Project.
provisions on tax Project.
exemption would not Furthermore, this case is not a case of tax
apply. Meanwhile, the NPC, as the executing exemption but of tax assumption under
government agency, entered into a contract the Exchange of Notes, which was further

with Mitsubishi Corporation for the fleshed out in the Contract. Hence, it is
associated civil works of the Project the Philippine Government, through the
NPC, which should shoulder the
Subsequently, petitioner filed with the payment of the same.
respondent an administrative claim for
refund for the erroneously paid income tax
and BPRT corresponding to the OECF-
funded portion of the Project.
CIR v. St Luke’s | G.R. A charitable institution St. Luke’s Medical Center, Inc. is a hospital Whether St. Luke’s is In 1998, St. Luke’s had total revenues of
No. 195909, “organized and organized as a non-stock, non-profit liable for deficiency P1,730,367,965 from services to paying
September 26, 2012 operated exclusively” corporation. The BIR assessed St. Luke’s income tax in 1998 patients. As such, St. Luke’s is a
for charitable deficiency taxes for 1998 claiming that St. under Section 27(B) of corporation not “operated exclusively”
purposes is allowed to Luke’s was operating for profit. BIR argued the NIRC for charitable or social welfare purposes
engage in “activities that Section 27(B) of the NIRC, imposing a insofar as its revenues from paying
conducted for profit” 10% preferential tax rate on proprietary patients are concerned. The clear and
without losing its tax nonprofit hospitals’ income, should be plain text of Section 30(E) and (G) of the
exempt status for its applicable here as the provision allegedly NIRC requires that an institution be
not-for-profit prevails over the general exemption on “operated exclusively” for charitable or
activities. The only income tax granted under Section 30(E) and social welfare purposes to be completely
consequence is that (G) for non-stock, non-profit charitable exempt from income tax. However, an
“income of whatever institutions. St. Luke’s responded that its institution under Section 30(E) or (G)
kind and character” free services to patients constituted 65.20% does not lose its tax exemption if it earns
from any activity of its 1998 operating income. Further, its income from its for-profit activities. Such
conducted for profit income does not inure to the benefit of any income is merely subject to income tax,

shall be subject to tax. individual and that the making of profit per previously at the ordinary corporate rate
se does not destroy its income tax but now at the preferential 10% rate
exemption. pursuant to Section 27(B).
Abra Valley v.
Aquino | G.R. No. L- While the law allows a Abra Valley College is an educational Whether the lot and No. The Court concluded that the school
39086, June 15, 1988 more liberal corporation and institution of higher building in question building as well as the lot where it is built
interpretation of the learning. It filed a complaint in the court to are used exclusively for should be taxed, not because the second
phrase "exclusively floor of the same is being used for
annul and declare void the "Notice of educational purposes
used for educational residential purposes, but because the
Seizure and Sale" of its lot and building for and should be
purposes", the first floor is being used for commercial
exemption extends to non-payment of real estate taxes. Petitioner exempted from paying purposes. While the use of the second
facilities which are contends that the primary use of the lot and real estate taxes floor of the main building for residential
incidental to and building for educational purposes and is purposes may find justification under the
reasonably necessary exempted from property taxes. concept of incidental use, which is
for the Respondents maintained that the lot and complimentary to the main or primary
accomplishment of purpose — educational, the lease of the
building in question is not exempted
the main purposes. first floor thereof to the Northern
because it may be used for the educational Marketing Corporation cannot by any
purposes of the college, but it was also used stretch of the imagination be considered
as as the permanent residence of the incidental to the purpose of education.
Director and his family and the ground floor

of the building is being used and rented by
a commercial establishment.
American Bible An ordinance that is of ABS has been distributing and selling Whether Ordinances The ordinances are constitutional but
Society v. City of general application bibles/gospel portions throughout the 2529 and 3000 are inapplicable to ABS.
Manila | G.R. No. L- and not particularly Philippines and translating the same into constitutional
9637 April 30, 1957 directed against several Philippine dialects. While the price asked for the religious
religious institutions, items was in some instances a little bit
and does not contain Manila’s City Treasurer informed them that higher than the actual cost of the same
any provisions it was violating several municipal ordinances but this cannot mean that appellant was
whatsoever by conducting the business of general engaged in the business of selling said
prescribing religious merchandise without the necessary Mayor's "merchandise" for profit.
censorship nor permit and municipal license. MCT gave
restraining the free them 3 days to comply. Thus, Ordinance No. 2529, is inapplicable
exercise and to ABS for it would violate the free
enjoyment of any ABS paid under protest. ABS contends that exercise and enjoyment of its religion.
religious profession Ordinances Nos. 2529 and 3000, as
cannot be considered respectively amended, are unconstitutional Ordinance No. 3000, requiring the
unconstitutional, even and illegal in so far as its society is obtention of the Mayor's permit, does

if applied to religious concerned, because they provide for not impose any charge upon the
institutions. religious censorship and restrain the free enjoyment of a right granted by the
exercise and enjoyment of its religious Constitution, nor tax the exercise of
profession, to wit: the distribution and sale religious practices.
of bibles and other religious literature to the
people of the Philippines. This Ordinance is of general application
and not particularly directed against
institutions like ABS, and it does not
contain any provisions whatsoever
prescribing religious censorship nor
restraining the free exercise and
enjoyment of any religious profession. It
seems clear, therefore, that Ordinance
No. 3000 cannot be considered
unconstitutional, even if applied to ABS.
City Assessor of The CHHMAC building

Cebu City v. should not be Benevola de Cebu is a non-stock non-profit Whether the new No. The 10% special assessment should
Association of classified as organization and is the owner of Chong Hua building is liable to pay be imposed for the CHHMAC building
Benevola de Cebu | "commercial" and be Hospital (CHH). A medical arts building was the 35% assessment which should be classified as "special"
G.R. No. 152904, imposed the constructed and in 1998 was issued with a level and not “commercial”. The medical arts
June 8, 2007 commercial level of
certification classifying the building as building is an integral part of CHH and is
35% as it is not
“commercial”. City assessor of Cebu incidental to and necessary for its
operated primarily for
profit but as an assessed the building at the assessment operations. It is primarily used by the
integral part of CHH. level of 35% and not 10% special hospital's accredited physicians to
With operations being assessment currently imposed on CHH and perform medical check-up, diagnosis,
devoted for the its other separate buildings- the CHH’s and treatment of patients. It also serves
benefit of the CHH's Dietary and Records Department. Petitioner as a specialized outpatient department
patients, it should be
claimed that the building is used as of the hospital. The charging of rentals
accorded the 10%

special assessment. commercial clinic/spaces for renting out to cannot be equated to a commercial
physicians and thus classified as venture because it is a practical necessity
commercial. Benevola de Cebu contended to recoup the investment cost of the
that the building is used actually, directly building, to cover the rental for the lot,
and exclusively as part of the hospital and and to maintain the building and its
should have an assessment level of 10%. facilities.

Jacinto-Henares v. St The only requisites for BIR issues RMO No. 20-2013. SPCM Whether RMO 20-2013
Paul College | G.R. the exemption of non- questioned the constitutionality of such is constitutional The issue had become moot as the
No. 215383 stock non-profit resolution because it imposes as a subsequent RMO 44-2016 already
(Resolution), March educational prerequisite to the enjoyment by non-stock, excluded non-stock, non-profit
8, 2017 institutions are: (1) The non-profit educational institutions of the educational institutions from the
school must be non- privilege of tax exemption in that they are coverage of the questioned RMO 20-
stock and non-profit; required to submit an application for tax 2013.
and (2) The income is exemption to the BIR to be approved by the
actually, directly and CIR in the form of a Tax Exemption Ruling NOTE:
exclusively used for (TER). Additionally, SPCM posits that the
It is clear from the provision under
educational purposes. RMO adds a requirement in that failure to
Paragraph 3, Section 4, Article XIV of the
No other requisites file an annual information return is a ground
1987 Constitution, as reiterated in
must be imposed by for a non-stock, nonprofit educational
Section 30(H) of NIRC that non-stock,
law. institution to "automatically lose its income
non-profit educational institutions are
tax-exempt status."
constitutionally exempt from tax on all
revenues derived in pursuance of its
purpose as an educational institution
and used actually, directly and
exclusively for educational purposes. For
such exemption, there are only two
requisites: (1) The school must be non-
stock and non-profit; and (2) The income
is actually, directly and exclusively used
for educational purposes. There are no
other conditions and limitations.
CIR v. DLSU | G.R. The income, revenues The BIR assessed DLSU the following Whether DLSU's Yes. First, DLSU is a non-stock, non-profit
196596, Nov. 9, and assets of non- deficiency taxes: income and revenues educational institution.
2016. stock, non-profit (1) income tax on rental earnings from proved to have been
educational restaurants/canteens and bookstores used actually, directly Requisites for availing the tax exemption

institutions proved to operating within the campus; and exclusively for are:
have been used (2) value-added tax (VAT) on business educational purposes a) the taxpayer falls under the
actually, directly and income; and are exempt from duties classification non-stock, non-profit
exclusively for (3) documentary stamp tax (DST) on loans and taxes educational institution; and
educational purposes and lease contracts. b) the income it seeks to be exempted
are exempt from from taxation is used actually,
duties and taxes. DLSU protested the assessment. DLSU directly and exclusively for
argued that it is a non-stock, non-profit educational purposes.
educational institution thus exempt from
tax. It principally anchored its petition on A plain reading of the Constitution would
Article XIV, Section 4 (3) of the Constitution. show that Article XIV, Section 4 (3) does
not require that the revenues and
income must have also been sourced
from educational activities or activities
related to the purposes of an educational
institution. The phrase all revenues is
unqualified by any reference to the
source of revenues.
Thus, if the university actually, directly

and exclusively uses for educational
purposes the revenues earned from the
lease of its school building, such
revenues shall be exempt from taxes and
duties. The tax exemption no longer
hinges on the use of the asset from
which the revenues were earned, but on
the actual, direct and exclusive use of the
revenues for educational purposes.

Chamber of Real MCIT is not violative of Petitioner argues that MCIT under Section 1. Whether the 1. No. MCIT is not a tax on capital but
Estate v. Romulo | due process. 27(E) of RA 8424 is unconstitutional becauseimposition of MCIT on on gross income - deducting the
G.R. No. 160756, it is highly oppressive, arbitrary and domestic corporations capital spent by a corporation in the
March 9, 2010 RR 9-98 is not a confiscatory which amounts to a deprivation is unconstitutional sale of its goods. MCIT is not an
deprivation of of property without due process of law. min corp income tax additional tax imposition. It is
property without due Reason: levies income tax even if there is no
2. Whether RR 9-98 is a imposed in lieu of the normal net
process of law. realized gain. deprivation of property income tax, and only if the normal
without due process of income tax is suspiciously low. There
It explains that gross income as defined law was no empirical data to show that
under said provision only considers the MCIT resulted in the confiscation of
cost of goods COGS and other direct expenses; other petitioner’s property.
major expenditures were not taken into
account. Thus, the tax base of the MCIT to a 2. No. RR 9-98, in declaring that MCIT
corporation’s gross income is tantamount should be imposed whenever such
to a confiscation of capital because gross corporation has zero or negative
income, unlike net income, is not "realized taxable income, merely defines the
gain. coverage of Section 27(E). MCIT
applies only after the 4th year and is
Petitioner questions the constitutionality of only temporary. Once normal income
- Sec 27 (E) of RA 8424 and is back, it will again apply 30%.
- RR 9-98 (to implement said
provision)

People v. Cayat |G.R Equal protection of Cayat, a native of Baguio, Benguet, Whether Act No. 1639 No. The guaranty of the equal protection
No. L-45987, May 5, the laws is not violated Mountain Province, was prosecuted for the unconstitutional is not violated based on reasonable
1939 on reasonable violation of Act No. 1639, specifically the Sec classification. This distinction is
classification. 2 and Sec 3 of the said law. He was arrested unquestionably reasonable, for the Act
when he was found to have one bottle of A- was intended to meet the peculiar
The classification, to 1-1 gin in his possession other than the so- conditions existing in the non-Christian
be reasonable, it must: called native wines and liquors which tribes. It is unquestionably designed to
1. rest on members of such tribes have been insure peace and order in and among the
substantial accustomed to make which is unlawful non-Christian tribes. The law is not
distinctions; under Act No. 1639. He was sentenced by limited in its application to conditions
2. germane to the the justice of the peace court of Baguio to existing at the time of its enactment. It is
purposes of the pay a fine of five pesos (P5) or suffer intended to apply for all times as long as
law; subsidiary imprisonment in case of those conditions exist. It also applies
3. not limited to insolvency. equally to all members of the class. It
existing may be unfair in its operation against a
conditions only; Cayat challenges the constitutionality of the certain number non-Christians by reason
and Act that it is violative of the due process of their degree of culture, is not an
4. must apply clause of the Constitution among others. argument against the equality of its
equally to all application.
members of the
same class.
(1) Whether the

Chamber of Real The imposition of the CREBA questioned the validity of Section imposition of MCIT is (1) Yes. An income tax is arbitrary and
Estate and Builders’ MCIT is constitutional 27(E) of the Tax Code which imposes the constitutional confiscatory if it taxes capital. However,
Associations, Inc., v. as it is imposed on minimum corporate income tax (MCIT) on MCIT is imposed on gross income which
Romulo | G.R. No. gross income and not corporations. It argued, among others, that (2) Whether the is computed by deducting from gross
160756, 9 March on capital. the use of gross income as MCIT base imposition of CWT on sales the capital spent by a corporation
2010 amounts to a confiscation of capital because income from sales of in the sale of its goods. Clearly, the
The taxes withheld are gross income, unlike net income, is not real properties is capital is not being taxed.
in the nature of realized gain. It also sought to invalidate the classified as ordinary

advance tax payments provisions of the Consolidated Withholding assets constitutional (2) Yes. Despite the imposition of CWT
by a taxpayer in order Tax Regulations, which prescribe the rules on GSP or FMV, the income tax base for
to cancel its possible and procedures for the collection of CWT on sales of real property classified as
future tax obligation. sales of real properties classified as ordinary ordinary assets remains as the entity’s
assets. net taxable income as provided in the
Tax Code. The seller shall file its income
tax return and credit the taxes withheld
by the withholding agent-buyer against
its tax due.
Equal protection The Municipal Board of Ormoc City passed Whether the Ordinance Yes, it is unconstitutional. The ordinance
Ormoc Sugar Co v. clause does not bar a Ordinance No. 4 imposing “on any and all is unconstitutional for taxes only centrifugal sugar produced
Cornejos | GR No L- reasonable production of centrifugal sugar milled at the being violative of the and exported by the Ormoc Sugar
23794, February 17, classification of the Ormoc Sugar Company, Inc. , in Ormoc City constitutional Company, Inc. and none other.
1968 subject of legislation a municipal tax equivalent to 1% per export limitation on equal
which: sale to the USA and other foreign protection of the laws At the time of the taxing ordinance's
(1)based on countries." enactment, Ormoc Sugar Company, Inc.,
substantial was the only sugar central in the city of
distinctions; Ormoc. Still, for the classification to be
(2)germane to the Payment for said tax were made by Ormoc reasonable, should be in terms
purpose of the law Sugar but under protest. Ormoc Sugar then applicable to future conditions as well.
filed a complaint against the City of Ormoc
(3) applies not only to The taxing ordinance should not be
present but as well as its Treasurer, Municipal Board and
also singular and exclusive to exclude any
future conditions; Mayor alleging that the Ordinance is subsequently established sugar central,
unconstitutional for being violative of the of the same class as plaintiff, from the
(4)classification equal protection clause and the rule on coverage of the tax.
applies only to those uniformity of taxation.
who belong to the
same class.

Tiu v. CA | G.R. No. The equal-protection President Ramos issued EO 97-A, specifying Whether the issuance No. The EO 97-A is not violative of the
127410 January 20, guarantee does not the area within which the tax incentive and of EO 97-A violates the equal protection clause; neither is it
1999 require territorial duty-free privilege was operative authorized equal protection clause discriminatory. It does not require
uniformity of laws. The under RA 7227 or “An Act Accelerating the territorial uniformity of laws and is
fundamental right of Conversion of Military Reservations Into subject to reasonable classification.
equal protection of Other Productive Uses, Creating the Bases There are substantial differences
the law is not absolute, Conversion and Development Authority for between the big investors who are being
but is subject to this Purpose, Providing Funds Therefor and lured to establish and operate their
reasonable for Other Purposes”. industries in so-called “secured area” and
classification. the present business operators outside
Conrado Tiu et al challenged its for allegedly the area.
being violative of their right to equal
protection of the laws, inasmuch as the On one hand, we are talking of billion
order granted tax and duty incentives only peso investments and thousands of new
to businesses and residents within the jobs, and on the other hand, definitely
“secured area” of the Subic Special none of such magnitude. In the first, the
Economic Zone and denying them to those economic impact is national; in the
who live within the Zone but outside the second, only local. Business activities
“fenced-in” territory. outside the “secured area” are not likely
to have any impact in achieving the
purpose of the law.
Air Canada v. CIR | There is no specific Air Canada is a foreign corporation. It was Whether Air Canada is Air Canada is liable to pay the regular
G.R. No. 169507, criterion as to what granted authority to operate as an offline engaged in trade or corporate income tax at 32%. It falls
January 11, 2016 constitutes “doing” or carrier by the Civil Aeronautics Board (CAB). business activity in the within the definition of a resident foreign
“engaging” or However, it does not have flight originating Philippines and be held corporation under Section 28(A)(1)2.
“transacting” business. from or coming to the Philippines and does liable to pay the 32%
Each case must be not operate any airline in the Philippines. corporate income tax Petitioner is undoubtedly “doing
judged in light of its business” or “engaged in trade or
peculiar It however engaged the services of Aerotel business” in the Philippines. In its case, it
environmental as its general sales agent in the Philippines. was Aerotel who performs acts or works

circumstances. The Aerotel sold Air Canada’s passage or exercises functions that are incidental
terms imply a documents in the Philippines from 2000- and beneficial to the purpose of the
continuity of 2002. petitioner's business.
commercial dealings
and arrangements, Air Canada paid its income taxes based on The activities of Aerotel bring direct
and contemplates, to its Gross Philippine Billings (GPB) receipts or profits to Air Canada. Further,
that extent, the amounting to P5.1M. It then filed a tax petitioner was issued by the CAB an
performance of acts or refund for its alleged erroneous payments authority to operate as an offline carrier
works or the exercise with BIR and with CTA. in the Philippines for five years. It is
of some of the therefore a resident foreign corporation
functions normally CTA denied the petition and said that Air that is taxable on its income derived from
incidental to, and in Canada was liable to pay 32% corporate sources within the Philippines.
progressive income tax, and not tax based on GPB since
prosecution of the its income were derived from the sale of
commercial gain or for airline tickets within the Philippines through
the purpose and Aerotel.
object of the business
organization.

CIR v. Covanta Even though tax After assessing it for deficiency value-added Whether CEPHI Yes.
Energy PH Holding | amnesty partakes of tax and expanded withholding tax, the properly availed of the
G.R. No. 203160, the nature of tax Commissioner of Internal Revenue (CIR) tax amnesty program RA 9840 laid down the procedure for
January 24, 2018 exemption is issued Covanta Energy Philippine Holdings, under RA 9840 availing of the tax amnesty. CEPHI
construed strictly Inc. (CEPHI) formal letters of demand and complied with all requirements
against the taxpayer, assessment notices. CEPHI protested the thereunder and is entitled to tax
once compliance is assessment, and filed a petition at the Court amnesty. Its privilege is revoked only
shown, tax amnesty of Tax Appeals (CTA) informing it that it when (1) it fails to file a SALN and the Tax
must be granted. applied for tax amnesty program under RA Amnesty Return; (2) the net worth of the
9480. The CIR disputed this claim, arguing taxpayer in the SALN as of December 31,
that CEPHI did not strictly comply with the 2005 is proven to be understated to the
statutory requirements under the law. The extent of 30% or more.
CTA ruled for CEPHI. However, aside from the CIR’s bare
allegations, it had no evidence to prove
that CEPHI was not entitled to the
privileges under the law. Albeit tax
amnesty partakes the nature of tax
exemption, and is construed against the
taxpayer, if compliance with the
requirements are shown, privilege must
be granted.

TOPIC TWO: INCOME TAXATION - GENERAL OVERVIEW
Mandanas et al v. The just share of the LGUs Congress enacted RA 7160 (LGC), in order Whether the exclusion of No. Congress has exceeded its
Ochoa | G.R. No. or the Internal Revenue to guarantee the fiscal autonomy of the certain national taxes constitutional boundary by limiting
199802 April 10, Allotment is derived from LGUs through the IRA. The share of the from the base amount for to the NIRTs the base from which to
2019 the national taxes which are LGUs, heretofore known as the Internal the computation of the compute the just share of the LGUs.
levied by the National Revenue Allotment (IRA), has been just share of the LGUs in Section 6 of the 1987 Constitution,
Government as mandated regularly released to the LGUs. Mandanas the national taxes is mentions national taxes as the
by Section 6 of the 1987 et al. assails the manner the General constitutional source of the just share of the LGUs
Constitution. Appropriations Act (GAA) for FY 2012 while Section 284 ordains that the
computed the IRA for the LGUs.He further share of the LGUs be taken from
alleges that certain collections of NIRTs by national internal revenue taxes
the Bureau of Customs (BOC) — instead. Although it has the primary
specifically: excise taxes, value added taxes discretion to determine and fix the
(VATs) and documentary stamp taxes just share of the LGUs in the
(DSTs) — have not been included in the national taxes (e.g. Section 284 of
base amounts for the computation of the the LGC), Congress cannot disobey
IRA and that such taxes, should form part the express mandate of Section 6,
of the base from which the IRA should be Article X of the 1987 Constitution
computed because they constituted for the just share of the LGUs to be
NIRTs. derived from the national taxes.

Soriano v. Secretary The intent of the law is for R.A. 9504 was approved and signed into Whether the increased Yes. The exemptions should be
of Finance | G.R. No. the state to give the law by President Arroyo. On 6 July 2008, exemptions should be applied to the entire taxable year
184450, January 24, taxpayer the maximum the end of the 15-day period, the law took applied to the entire 2008. RA 9504 is a piece of social
2017 exemptions that can be effect. taxable year legislation. Its intent is to make the
availed, notwithstanding proposed law immediately
the fact the latter’s actual Soriano et al. primarily assail Section 3 of applicable— to provide immediate
status would qualify only for RR 10-2008 providing for the prorated tax relief to the MWEs.
a lower exemptions if application of the personal and additional
prorating were employed. exemptions for taxable year 2008 to begin Not only did RA 9504 take effect
only effective 6 July 2008 for being before the deadline for the filing of
contrary to Section 4 of Republic Act No. ITR and payment of taxes for
9504.They argue that the prorated taxable year 2008, it took effect way
application of the personal and additional before the close of the taxable year.
exemptions is not "the legislative
The policy of full taxable year
intendment in this jurisdiction.” They stress
treatment, esp. of the personal and
that Congress has always maintained a
additional exemptions, is clear
policy of "full taxable year treatment” as
under Sec. 35 of the 1997 Tax Code.
regards the application of tax exemption
laws.

Madrigal v. Rafferty
| GR. No. L-12287, The essential difference Spouses Madrigal and have a conjugal Whether the additional Capital is a fund (i.e. a fund of
August 7, 1918 between capital and income partnership. Madrigal filed his total net income tax should be property existing at an instant of
is that capital is a fund; income for the year is P296,302.73. divided into equal parts time); income is a flow (i.e. flow of
income is a flow because of the conjugal services renderd by capital through
He submitted the claim that the said total partnership existing a period of time). A tax on income
net income did not represent his income between them is not a tax on property. What is
for 1914, but was the income of the being taxed is the fruit not the tree.
conjugal partnership between the spouses,
and computing and assessing the Paterno has an inchoate right in the
additional income tax provided by the Act property of her husband during the
of Congress of Oct. 3, 1913, the income conjugal partnership. She cannot
declared by Madrigal and the other half of make a separate return to receive
Paterno. the benefit of the exemption which
arising by reason of the additional
They brought action agruing that had the tax. As she has no estate or income
income tax for 1914 been correctly and entirely distinct from her husband
lawfully computed, there would have been property, the income cannot
due payable by each of the plaintiffs the properly be considered the
sum of P2,921.09, which taken together separate income of the wife for the
amount of P5842.18, instead of P9,668.21. purpose of the additional tax.

CIR v. Filinvest Since the term "control" is In 1996, FDC and FAI entered into a Deed Whether FDC met all the Yes, the requisites for the non-
Development Corp | clearly defined as of Exchange with FLI whereby transfer of requirements for non- recognition of gain or loss under
G.R. No. 167689, "ownership of stocks in a lands occurred. recognition of taxable the foregoing provision are as
July 19, 2011 corporation possessing at gain under sec 34 (c) (2) follows: (a) the transferee is a
least fifty-one percent of The ownership of FLI changed. FLI now sec 40 (c)(2) corporation; (b) the transferee
the total voting power of requested the BIR a ruling to the effect that exchanges its shares of stock for
classes of stocks entitled to no gain or loss should be recognized on property of the transferor; (c) the
one vote" under Section 34 the said transfer and BIR complied finding transfer is made by a person, acting
(c) (6) [c] of the 1993 NIRC, the exchange falling within sec 34 (c) (2) alone or together with others, not
the exchange of property now sec 40 (c)(2). exceeding four persons; and, (d) as
for stocks between FDC FAI a result of the exchange the
and FLI clearly qualify as a These were assessed on the taxable gain transferor, alone or together with
tax-free transaction under realized by FDC on the taxable gain others, not exceeding four, gains
paragraph 34 (c) (2) of the supposedly realized by FDC from the control of the transferee.
same provision. following: The BIR acknowledged the
1.The deed of exchange with FAI and FLI requisites in the Deed of Exchange
2.Dilution resulting from the shareholders the former executed with FDC and
agreement with RHP FAI. It is not taxable because the
3.Interest rate and documentary stamp exchange did not result to a
taxes imposable on the advances executed decrease of the ownership of FDC
by FDC. in FLI.
FAI and FDC filed protest.
Baier-Nickel v. CIR |
G.R. No 156305 The important factor which The court notes that in the case of CIR v. Whether the sales No. The fact that the recipient of
February 17 2003 determines the source of Baier Nickel, a previous case for refund of commission is taxable in commission income is the
income of personal services income withheld from respondent’s the Philippines. President and the majority
is not the instance of the remunerations for services rendered stockholder of the Philippine
payor, or the place where abroad for the year 1994, the court in this company does not alter the source
the contract of service is minute resolution sustained the ruling of of income. There are only two ways

entered into, or the place of the CA that the respondent is entitled for by which the president and other
payment, but the place refund for, in the instant case, her income members of the board can be
where the service is actually in 1995. granted compensation apart form
rendered. reasonable per diems: (1) when
there is a provision in the by laws
fixing their compensation; and (2)
when the stockholders agree to
give it to them. If none of these
condition are present , the
commission income cannot be
automatically attributed to
petitioner’s position in the
company.
CIR v. Baier-Nickel | The important factor which Respondent, a non-resident German Whether Respondent’s Yes. Non-resident aliens, whether
G.R. No. 153793, determines the source of citizen, is the President of JUBANITEX. sales commission income or not engaged in trade or
August 29, 2006 income of personal services JUBANITEX also appointed her as a is taxable in the business, are subject to Philippine
is not the residence of the commission agent with an agreement that Philippines income taxation on income
payor, or the place where she will receive 10% sales commission on received from sources within the
the contract for service is all her sales. Philippines. The important factor
entered into, or the place of which determines the source of
payment, but the place In 1995, respondent received her sales income of personal services is not
where the services were commission income, from which the residence of the payor, or
actually rendered. JUBANITEX withheld 10% withholding tax where the contract for service is
and remitted it to BIR. entered into, or the place of
payment, but the place where the
Respondent filed a claim for refund services were actually rendered.
contending that her sales commission
income is not taxable in the Philippines Here, the appointment letter
because such was a compensation for her stipulated that Respondent would

services rendered in Germany. be entitled 10% commission
income for "sales actually
CTA denied her claim holding that the concluded and collected through
commissions she received were her efforts." The evidence
remuneration for performance of her presented do not show that these
duties as President and not a mere sales ripened into concluded sales in
agent. Therefore, it is income taxable in the Germany. Further, respondent was
Philippines because JUBANITEX is a in the Philippines during the
domestic corporation. months she earned commission for
services allegedly performed
abroad.
CIR v. Marubeni Materials manufactured Marubeni is a foreign construction Whether Marubeni No. While the construction and
Corporation | G.R. and completed in other corporation under Japanese laws though should be taxed installation work were completed
No. 137377, countries are not subject to registered to do business in the within the Philippines, the evidence
December 18, 2001 Philippine taxes. Philippines, with a branch office is clear that some pieces of
somewhere in Manila. equipment and supplies were
completely designed and
CIR found out that Marubeni had engineered in Japan. The two sets
undeclared income from two contracts in of ship unloader and loader, the
the Philippines. One of those contracts was boats and mobile equipment for
made with the National Development the NDC project and the ammonia
Company (NDC) involving the storage tanks and refrigeration
construction of a wharf in Leyte. The other units were made and completed in
contract was made with the Philippine Japan. They were already finished
Phosphate Fertilizer Corporation involving products when shipped to the
the construction of an ammonia storage Philippines. The other construction
complex, also in Leyte. supplies listed under the Offshore
Portion such as the steel sheets,
CIR also found out that though the pipes and structures, electrical and
materials for the two projects were instrumental apparatus, these were

shipped from Japan, they nonetheless not finished products when
involved construction of facilities in the shipped to the Philippines. They,
Philippines. For CIR, Marubeni should be however, were likewise fabricated
taxed. and manufactured by the sub-
contractors in Japan. All services for
the design, fabrication, engineering
and manufacture of the materials
and equipment under Japanese Yen
Portion I were made and completed
in Japan.
These services were rendered

outside the taxing jurisdiction of
the Philippines and are therefore
not subject to contractor’s tax.”
Tuazon v. Lingad | If a taxpayer sells or Tuason inherited several parcels of land, all Whether the properties No. "Capital assets" includes all the
G.R. No. L-24248 exchanges any of the of which were sold to their respective inherited by Tuason and properties of a taxpayer whether or
July 31, 1974 properties not listed by law occupants. subsequently sold by him not connected with his trade or
as a capital asset, any gain be regarded as capital business, except:
or loss relative thereto is an In his 1957 tax return, he treated his assets
ordinary gain or an ordinary income from the sale of the small lots as (1) stock in trade or other property
loss. capital gains and included only 1/2 thereof included in the taxpayer's inventory
as taxable income. He also deducted the (2) property primarily for sale to
real estate dealer's tax he paid for 1957. It customers in the ordinary course of
was explained, however, that the payment his trade or business
of the dealer's tax was on the account of (3) property used in the trade or
rentals received from the 28 lots and other business of the taxpayer and
properties. subject to depreciation allowance
(4) real property used in trade or
business.

The CIR approved the petitioner's
treatment of his income from the sale but If the taxpayer sells or exchanges
subsequently reversed his opinion and any of the properties above-
considered the profits as ordinary gains. enumerated, any gain or loss
Tuason thereafter received a letter from relative thereto is an ordinary gain
the BIR asking him to pay deficiency or an ordinary loss; the gain or loss
income tax. from the sale or exchange of all
other properties of the taxpayer is a
capital gain or a capital loss.
In this case, the petitioner's sales of

the lots forming part of his rental
business cannot be characterized as
other than sales of non-capital
assets.

Republic v. De la Whether the assessment
Rama | G.R. No. L- Section 21 and Section 56 of The Republic filed with the Court of First of the deficiency was No, it was improper. The dividends
21108, November the National Internal Instance Manila a case against the heirs of proper in question were not actually paid
29, 1966 Revenue Code requires that Esteban De la Rama alleging that the either to the estate, or to the heirs
the income must be estate has an unpaid deficiency on its of the late Esteban de la Rama.
received by an individual income tax due to an undeclared income Moreover, there were no proof that
before a tax can be levied flowing from cash dividends which were the dividends were applied to the
thereon. purportedly received by the De la Rama purported debts incurred by the
Steamship, Inc. Respondents denied such deceased. The second debt to
claim and raised that the administration of which the dividends were partly
the estate had been extended by the applied were accounts "due from
probate court precisely for the purpose of Hijos de I. de la Rama, Inc." Said
collecting said dividends. debtor was an entity separate and
distinct from the deceased. Thus, its
debts could not be charged against
the deceased, even if the deceased
was the principal owner thereof, in
the absence of proof of substitution
of debtor. Hence, if income has not
been received, no income tax can
be assessed thereon.

CIR v. Pilipinas Shell Pilipinas Shell Petroleum Corporation, Under Section 129 of the NIRC,
Petroleum Corp | The avowed purpose of a respondent, is engaged in the business of Whether Respondent is excise taxes are those applied to
G.R. No. 188497, tax exemption is always processing, treating and refining entitled to a tax refund goods manufactured or produced
April 25, 2012 "some public benefit or petroleum for the purpose of producing being exempt from in the Philippines for domestic sale
interest, which the law- marketable products and the subsequent paying excise tax it paid or consumption or for any other
making body considers sale thereof. on petroleum products it disposition and to things imported.
sufficient to offset the sold to international Excise taxes as used in our Tax Code
monetary loss entailed in It filed several formal claims with the Large carriers fall under two types – (1) specific
the grant of the exemption Taxpayers Audit & Investigation Division tax which is based on weight or
claiming for refund of the excise taxes it volume capacity and other physical
paid on petroleum products it sold to unit of measurement, and (2) ad
international carriers of foreign registry for valorem tax which is based on
their consumption outside the Philippines. selling price or other specified
However, no action was taken by the BIR value of the goods. Aviation fuel is
hence it filed a petition for review with subject to specific tax under Section
CTA. The CTA ruled in favor of respondent. 148 (g) which attaches to said
product "as soon as they are in
existence as such."

Renato Diaz and First, Sec 108 of NIRC Petitioners filed a petition for declaratory
Aurora Timbol v. imposes VAT on all kinds of relief assailing the validity of the Whether the government No. Tollway operations are in a
Secretary of Finance services rendered for a fee impending imposition of value-added tax is unlawfully expanding nature “sale or exchange of
and CIR | GR. including those specified in (VAT) by the BIR on the collections of VAT coverage by services” and “services of franchise
193007, July 19, the list. Second, the term tollway operators. including tollway grantees” which in its nature is
2011. franchise grantees under operators and tollway covered by VAT as provided in Sec
Petitioners argued that Congress did not
Sec 108 covers all activities operations in the terms 108 of the NIRC.
intend to include toll fees within the
of public consequences that “franchise grantees” and
meaning of “sale of services” that are Tollways operators construct,
necessarily require a special sale of services” under Sec
subject to VAT; that toll fee is a user’s tax maintain and operate expressways
grant of authority from the 108 of the NIRC
not a sale tax. at the operators’ expenses. Thus
state. Third, VAT on tollway
operations are not deemed The government avers that the NIRC when a tollway operator takes a toll
as taxes due to the nature of imposes VAT on all kinds of services of fee from a motorist, the fee is in
VAT as an indirect tax. franchise grantees, including tollway effect for the latter’s use of the
operations, except where the law provides tollway facilities over which the
otherwise. operator enjoys private proprietary
rights.
Lastly, the non- inclusion of VAT for
computing toll rate cannot exempt tollway In that sense, the tollway operator
operators from VAT. In any event, it cannot is no different from the service
be claimed that the rights to reasonable providers as enumerated under Sec
return will be impair by the VAT since this 108. special right to do an act or
is imposed on top of the toll rate. series of acts of public concern.

Philippine No need for Congress to Petitioner seeks the nullity of Sect1 of Whether PAGCOR’s Income from Operation of related
Amusement and grant tax exemption to RA9337 insofar as it excludes petitioner income from operation of services: Subject to Income Tax but
Gaming Corp v. BIR | petitioner with respect to its from the enumeration GOCCs exempted related services is subject not to Franchise Tax.
GR No. 208731, income from gaming from liability for corporate income tax. to both income tax and
January 27, 2016 operating as the same is 5%S franchise tax Petitioner’s Charter is not deemed
already exempted from all SC held that Sec1 of RA9337 is valid and repealed or amended by RA 9337;
taxes of any kind or form, constitutional. However it declared that petitioner’s income derived from
income or otherwise, the regulation that subject PAGCOR to gaming operation is subject only to
national or local, under its 10% VAT is null and void for being contrary the five percent (5%) franchise tax,
Charter, save only for the to the NIRC. in accordance with PD 1869, as
five percent (5%) franchise amended. With respect to
tax. BIR issued RMCNo.33-2013 pursuant to petitioner’s income from operation
the decision, It now subjects the income of other related services, the same
from PAGCOR’s operations and licensing is subject to income tax only. The
of gambling casinos, gaming clubs and five percent (5%) franchise tax finds
other similar recreation or amusement no application with respect to
places, gaming pools, and other related petitioner’s income from other
operations, to corporate income tax under related services, in view of the
the NIRC. express provision of Section 14(5)
of PD 1869, as amended.
However, PAGCOR alleges that said RMC
No.33-2013 is an erroneous interpretation
and application of the aforesaid decision.

United Airlines v. Tax refunds, like tax
CIR | G.R. No. exemptions, are construed United Airlines, Inc. used to be an Whether the petitioner is The Court ruled that although the
178788, September strictly against the taxpayer international carrier with passenger and entitled to a refund of the petitioner is no longer taxable for
29, 2010 and liberally in favor of the cargo flights. Upon cessation of its amount it paid as income gross passenger revenues, the
taxing authority passenger flights, it continued operating tax on its passenger erroneous deductions made on its
cargo flights from the Philippines. revenues in 1999 gross cargo revenue due to its
Petitioner filed a claim for income tax reported lower cargo revenue
refund, pertaining to income taxes paid on resulted in the payment of a lower
gross passenger and cargo revenues for income tax. Having underpaid the
the taxable years 1999 to 2001. As it no GPB tax due on its cargo revenues
longer operated passenger flights in 1998, for 1999, petitioner is not entitled
its passenger revenue for 1999 to 2001 to a refund of its GPB tax on its
cannot be considered as income from passenger revenue, the amount of
sources within the Philippines, and should the former being even much higher
not be subject to income tax. The CTA (P31.43 million) than the tax refund
ruled that no erroneously paid tax may be sought (P5.2 million). The
refunded because the income tax on Gross underpayment of the income tax on
Philippine Billings (GPB) applies to gross cargo revenue is higher than the
revenue from carriage of cargoes erroneous income tax it paid on
originating from the Philippines. passenger revenue subject of the
claim for refund, such that the
refund cannot be granted.

CIR v. Smart Under the RP-Malaysia SMI entered into 3 Agreements for Whether the payments Of the three Agreements, refunds
Communication, Treaty, "business profits" of Programming and Consultancy Services made to Prism constitute of payment for CM and SIM
Inc. | an enterprise of a with Prism, a Malaysian company for business profits or Application programs are in order.
G.R. Nos. 179045-46 Contracting State is taxable U$547,822.45. royalties It was established during the trial
August 25, 2010 only in that State, unless the that Prism does not have a
enterprise carries on Thinking that these payments constitute permanent establishment in the
business in the other royalties, SMI withheld the amount worth Philippines. Hence, "business
Contracting State through a 25% royalty tax under the RP-Malaysia Tax profits" derived from Prism's
permanent establishment, Treaty. dealings with respondent are not
which is a fixed place of taxable.
business where the SMI filed a claim for refund for the same
enterprise is wholly or partly amount withheld, claiming that the Prism has intellectual property right
carried on. payments it made to Prism are not over the SDM program, but not
royalties but “business profits: pursuant to over the CM and SIM Application
the definition of royalties under the RP- programs as the proprietary rights
Malasysia Tax Treaty” and that since under of these programs belong to Smart.
Article 7 of the RP-Malaysia Tax Treaty, Thus, out of the payments made to
"business profits" are taxable in the Prism, only the payment for the
Philippines "only if attributable to a SDM program is a royalty subject to
permanent establishment in the a 25% withholding tax.
Philippines, the payments made to Prism,
a Malaysian company with no permanent A refund of the erroneously
establishment in the Philippines," should withheld royalty taxes for the
not be taxed. payments pertaining to the CM and
SIM Application Agreements is
therefore in order.

Miguel G. Osorio
Pension Foundation, Tax exemption is to be Petitioner is a non-stock and non-profit Whether petitioner as Yes. Petitioner has proven that the
Inc. v. CA and CIR | enjoyed by the income of corporation which administers employee’s trustee of the Employees' income from the sale of the MBP lot
G.R. No. 162175, the pension trust. trust or retirement funds the (Employees’ Trust Fund, is entitled to came from an investment by the
June 28, 2010 Otherwise, taxation of those Trust Fund) for the benefit of the claim the tax refund which Employees' Trust Fund, petitioner,
earnings would diminish the employees of Victorias Milling Company, was paid in the sale of the as trustee of the Employees' Trust
accumulated income and Inc. (VMC). It invested the funds of the MBP lot Fund, is entitled to claim the tax
reduce whatever the Employees Trust Fund to purchase MBP refund of which was erroneously
beneficiaries would receive lot. Petitioner claims that to pay the paid in the sale of the MBP lot. The
out of the trust fund. It is retirement and pension benefits of VMC Notarized Memorandum of
exempt from the payment employees, its Board of Trustees Agreement, clearly established that
of income tax and from the authorized the sale of its share in the MBP the petitioner, on behalf of the
payment of the CWT on the lot to Metrobank. As a withholding agent, Employees' Trust Fund, indeed
sale of their real property. Metrobank paid the BIR its withholding tax invested in the purchase of the MBP
on the sale of the property. lot. Since the income from the sale
of the MBP lot came from an
Petitioner as trustee claims that the investment by the Employees' Trust
income earned by the Employee’s Trust Fund, petitioner, as trustee of the
Fund is tax exempt under Section 53 (b) of Employees' Trust Fund, is entitled
the Tax Code and is claiming for a tax to claim the tax refund.
refund.

TOPIC THREE: INCOME TAX FOR INDIVIDUALS
First Lepanto Directors are considered

Taisho Insurance employees for taxation First Lepanto is a large taxpayer which has Whether directors are Yes. For taxation purposes, Revenue
Corp v. CIR | G.R. purposes. Their non- been audited by BIR for tax deficiencies for considered employees Regulation 12-86 defines an
No. 197117, April inclusion in the alphalist of taxable year 1997. It was eventually found for taxation purposes employee as an individual
10, 2013 employees does not raise a by BIR that it had a deficiency for performing services for a
presumption of their status withholding tax on employees’ corporation, whether as an officer
as employees or otherwise. compensation, among others. First and director or merely as a director
Lepanto contended that it should not be whose duties are confined to
held liable in that such assessed tax attendance at and participation in
deficiencies pertained to compensation to the meeting of the BODs.
its directors, who are not considered
company employees. The non-inclusion of the names of
these directors in the company’s
alpha list does not ipso facto create
a presumption that they are not
employees because the imposition
of withholding tax on compensation
hinges upon the nature of work
performed by such individuals in the
company.

ING Bank NV v. CIR The tax on compensation ING Bank received a Final Assessment Whether the assessment Yes. The contention of ING Bank
| GR 167679, July income is withheld at source Notice from CIR, which covered deficiency for deficiency that the bonus accruals in 1996 and
22, 2015 under the creditable tax assessments for taxable years 1996 and withholding tax on 1997 were not yet subject to
withholding tax system 1997. compensation is proper withholding tax because these
wherein the tax withheld is bonuses were actually distributed
intended to equal or at least ING Bank filed a Petition seeking the only in the succeeding years of their
approximate the tax due of cancellation and withdrawal of the accrual (i.e., in 1997 and 1998) when
the payee on the said deficiency tax assessments for the years the amounts were finally
income. 1996 and 1997, including the alleged determined, is untenable.
deficiency documentary stamp tax on
special savings accounts, deficiency Every form of compensation for
onshore tax, and deficiency withholding personal services is subject to
tax. income tax and, consequently, to
withholding tax.
CTA held that the assessments for 1996 and
1997 deficiency income tax, 1996 and 1997 The name designated to the
deficiency branch profit remittance tax and remuneration for services is
1997 deficiency documentary stamp tax, immaterial. Thus, "salaries, wages,
are cancelled; HOWEVER, the assessments emoluments and honoraria,
for 1996 and 1997 deficiency withholding bonuses, allowances, [taxable]
tax on compensation, 1996 deficiency fringe benefits, pensions and
onshore tax and 1996 and 1997 deficiency retirement pay, and other income of
documentary stamp tax on special savings a similar nature constitute
accounts are hereby UPHELD. compensation income" that is
taxable.
Hence, ING Bank is liable for the

withholding tax on the bonuses
since it claimed the same as
expenses in the year they were
accrued.

Banco de Oro v. A deposit substitute will be This involves PEACe Bonds would initially Whether the PEACe The PEACe Bonds, according to the
Republic of the imposed with 20% final be purchased by a special purpose vehicle Bonds are within the SC, requires further information for
Philippines | G.R. withholding tax depending on behalf of Caucus of Development NGO purview of deposit proper determination of whether
No. 198756, on the number of lenders. Networks (CODE-NGO), repackaged and substitutes these bonds are within the purview
January 13, 2015 sold at a premium to investors. of deposit substitutes.
CODE-NGO wrote a letter to BIR to inquire Until then, the proper procedure for
as to whether the PEACe Bonds will be the BIR is to collect the unpaid final
subject to withholding tax of 20%. withholding tax directly from RCBC
Capital/ CODE-NGO, or any lender if
such be the case.
It provided the definition of deposit

substitute and placed the 20-lender
rule. When there are 20 or more
lenders or investors in a transaction
for a specific bond issue, the seller is
required to withhold the 20% final
income tax on the imputed interest
income from the bonds.

Republic v.
Spouses Salvador | Consequential damages are Spouses Salvador are the registered Whether the capital gains No. The transfer of property
G.R. No. 205428, 7 only awarded if as a result of owners of a parcel of land. tax on the transfer of the through expropriation proceedings
June 2017 the expropriation, the expropriated property is a sale or· exchange, and profit
remaining property of the On November 9, 2011, the Republic, can be considered as from the transaction constitutes
owner suffers from an represented by the Department of Public consequential damages capital gain. Since capital gains tax
impairment or decrease in Works and Highways, filed a verified that may be awarded to is a tax on passive income, it is the
value. Complaint before the RTC for the Spouses Salvador seller who is liable to shoulder the
expropriation of a portion of said parcel of tax.
land, and the improvements thereon, for
the construction of the C-5 Northern Link Besides, consequential damages are
Road Project Phase 2 (Segment 9) from the only awarded if as a result of the
North Luzon Expressway (NLEX) to expropriation, the remaining
McArthur Highway. property of the owner suffers from
an impairment or decrease in value.
On February 10, 2012, Spouses Salvador In this case, no evidence was
received two checks from the DPWH submitted to prove any impairment
representing 100% of the zonal value of the or decrease in value of the subject
subject property and the cost of the one- property as a result of the
story semi-concrete residential house expropriation.
amounting to P161,850,00 and
P532,449.22, respectively.

Banco de Oro v. Interest on bank deposit is BIR declared that the PEACe Bonds, being Yes, it is proper. The interest income
Republic of the one of the items includible in deposit substitutes, were subject to 20% Whether an interest on bank deposits was subjected for
Philippines | G.R gross income. In order to final withholding tax. BDO filed a petition income derived from under PD No. 1156 and PD No.
No. 198756, maximize the collection of and SC issued a TRO enjoining the government debt 1154. It imposed a 35% transaction
August 16, 2016 the income tax on interest on implementation of the BIR ruling, with the instruments considered tax (final tax) on interest income
bank deposits, it is necessary condition that 20% FWT be delivered to the as deposit substitutes from every commercial paper issued
to apply the withholdings banks to be placed in escrow. SC ruled that proper in the primary market, regardless of
system on this type of fixed the number of lenders at transaction whether they are issued to the
or determinable income. determines whether a debt instrument is a public or not.
deposit substitute subject to 20% FWT.
When at any transaction, funds are The imposition of a final tax on
obtained from 20 or more lenders, there is commercial papers was aimed
public borrowing and bonds are deemed primarily to improve the
deposit substitutes. Hence, seller is administrative provisions of the
required to withhold 20% FWT on the National Internal Revenue Code to
imputed interest income from the bonds. ensure the collection on the tax on
Motions for clarification were filed by BDO, interest on commercial papers used
et al and the Republic. as principal instruments issued in
the primary market. It was reported
that BIR had no means of enforcing
strictly the taxation on interest
income earned in the money market
transactions.
Confederation for 1. Compensation for Petitioners assail the validity of the Whether Sec. III of the Yes. While Section III enumerates
Unity, Recognition services, whether paid in provisions of RMO No. 23-2014, specifically RMO is valid certain allowances which may be
and Advancement cash or in kind, is generally Secs. III and IV, for subjecting to subject to withholding tax, it does
of Government subject to income tax and withholding taxes non-taxable allowances, not exclude the possibility that
Employees v. CIR | consequently to withholding bonuses and benefits received by these allowances may fall under the
G.R. No. 213446 tax. government employees. exemptions identified under Section
July 3, 2018 IV, thus, the phrase, "subject to the

2. Withholding tax on CIR argues that said RMO is valid since the exemptions enumerated herein." In
compensation applies to all allowance, bonuses or benefits listed under other words, said provisions
employed individuals, Sec. III are not fringe benefits within the articulate in a general and broad
deriving income from purview of the Tax Code, hence, it may not language the provisions of the NIRC
services rendered in the be subjected to withholding tax. The Court on the forms of compensation
Philippines with the issued a Resolution directing the Fiscal income deemed subject to
employer as the withholding Management and Budget Office of the withholding tax and the allowances,
agent. Further, the term Court to maintain the status quo by the bonuses and benefits exempted
employee covers all non-withholding of taxes from the benefits therefrom. They cannot be said to
employees, including officers authorized to be granted to judiciary have been issued contrary to the
and employees, whether officials and personnel until such time that provisions of the 1997 NIRC, as
elected or appointed, of the a decision is rendered in the instant amended, and its implementing
Government. consolidated cases. Hence, this petition. rules.
3. An employer embraces Also, the equal protection clause is

not only an individual and an not violated by an executive
organization engaged in issuance which simply reinforced
trade or business, but also existing taxes applicable to both the
includes an organization private and public sector. While the
exempt from income tax, assailed RMO is a directive to the
such as the government. Government, as a reminder of its
obligation as a withholding agent, it
did not, alter or amend the
provisions of the Tax Code, for or
against the Government or its
employees.

TOPIC FOUR: INCOME TAX FOR CORPORATIONS
Howden v. CIR | G.R. Non-resident foreign Whether the reinsurance

No. L-19392, April corporations are taxed for Commonwealth Insurance Co., a domestic premiums remitted to Yes. Non-resident foreign
14, 1965 income derived in the corporation, entered into reinsurance Howden are considered corporations are taxable for income
Philippines. The source of contracts with 32 British insurance income derived from the derived within the Philippines. The
income should be based companies represented by Alexander Philippines source of an income is the property,
on the activity and not the Howden & Co. (Howden). The contract activity or service that produced the
business, as a corporation was signed by the foreign insurers in income, which should not be confused
conducting all its England before it was sent to Manila for with “business” as an income may be
business abroad can still Commonwealth’s signing. earned by a corporation in the
be taxed on income Philippines although such corporation
earned in the Philippines. In 1951, Commonwealth remitted P700k conducts all its businesses abroad.
to Howden as reinsurance premiums and
remitted to BIR, in behalf of Howden, P66k The reinsurance premiums remitted to
as withholding tax on the reinsurance appellants by virtue of the reinsurance
premiums. Howden filed a claim for contracts had for their source the
refund, claiming that they should not be undertaking to indemnify
taxed, but was denied. Commonwealth against liability. Said
undertaking is the source of income
derived in the Philippines. While the
reinsurance contracts were signed by
the foreign companies in England, it
were deemed perfected in the
Philippines for Commonwealth signed
them last in Manila.

Evangelista et al v. Section 24 of the NIRC Petitioners bought several real properties Whether petitioners are Yes. The issue lies on the meaning of
CIR | G.R. No. L- provides that a tax shall and appointed Simeon, their brother, as subject to corporate tax the terms “corporation” and
9996, October be levied on every the manager, granting him the power and “partnership” as used in Sections 24
15, 1957 corporation no matter authority to sell, lease or rent out said and 84 of the NIRC.
how created or organized properties to third persons. These
except general co- properties were then leased or rented to The court ruled that the elements of
partnerships and Section various tenants. They have been receiving partnership were complied with. The
84 states that the term realized rental income from the period first element is present for petitioners
corporation includes 1945 to 1949. have agreed to, and did, contribute
among others, money and property to a common
partnership. The CIR demanded the payment of fund. The second element is also
income tax on corporations, real estate satisfied that their purpose was to
dealer’s fixed tax, corporation residence engage in real estate transactions for
tax from the year 1945 to 1949 and sent a monetary gain and then divide the
letter of demand and corresponding tax same among themselves.
assessments. The petitioners instituted a
case before the CTA to reverse the For purposes of corporate tax, NIRC
decision of the CIR and that they be includes these partnerships, with the
absolved from paying the taxes in exception only of duly registered
question. The CTA denied their petition. general co partnerships within the
purview of the term "corporation." The
petitioners constitute a partnership
thus are subject to corporate tax.

CIR v. Pilipinas Shell Sec. 135 should be A Motion for Reconsideration was filed by Whether the burden of While the Court said that Shell was
Petroleum Corp | construed as prohibiting respondent on an SC Decision in 2012, payment of excise tax can indeed entitled to refund in order to
G.R. No. 188497 the shifting of the burden which ultimately ruled that Court of Tax be shifted to the keep strength in tourism and keep the
February 19, 2014 of the excise tax to the Appeals (CTA) erred in granting international carriers who Philippine economy competitive, the
international carriers who respondent's claim for tax refund because purchase locally Court did maintain that the burden to
buys petroleum products it failed to establish a tax exemption in its manufactured petroleum shoulder such excise tax cannot be
from the local favor under Section 135 (a) of the NIRC. products shifted to the international carriers.
manufacturers, because
an excise tax is a tax on Respondent contended that petroleum Because an excise tax is a tax on the
the manufacturer and not products sold internationally are exempt manufacturer and not on the
on the purchaser. from excise tax, since requiring local purchaser, and there being no express
manufacturers to absorb the tax burden is grant under the NIRC of exemption
contrary to the State's policy of protecting from payment of excise tax to local
gasoline dealers and distributors from manufacturers of petroleum products
unfair and onerous trade conditions. sold to international carriers, Sec. 135
Without the exemption, they are placed at should be construed as prohibiting the
a competitive disadvantage, since foreign shifting of the burden of the excise tax
oil producers are not subject to excise tax to the international carriers who buys
for the same transaction. petroleum products from the local
manufacturers.
Obillos et al v. CIR | The sharing of gross Obillos' siblings inherited two lots from Whether Obillos siblings No. They were mere co-owners and to
G.R. No. L-68118, returns does not of itself their father which enabled them to build should be treated as consider them as partners would
Oct. 25, 1985 establish a partnership, their residences. After having held the lot unregistered partners obliterate the distinction between a
whether or not the person for more than a year as co-owners, they and were thus liable to co-ownership and a partnership.
sharing them has a sold the lots to Walled City Securities pay the corporate income
common or joint right or Corporation and Olga Canda and paid tax Art. 1769 of the Civil Code provides
interest in any property their respective income taxes from the that the sharing of gross returns does
from which the returns profits received as capital gain. not of itself establish a partnership.
are derived. There must There must be an unmistakable

be an unmistakable The CIR believed that the Obillos siblings intention to form a partnership to
intention to form a had formed an unregistered partnership constitute such venture.
partnership or joint or joint venture within the meaning of
venture. Sections 24(a) and 84(b) of the Tax Code
and thus required them to pay corporate
income tax in addition to the individual
taxes paid to cover the alleged tax
deficiency.
Officemetro A Revenue Memorandum For the taxable year 2005, the (1) Whether No. Officemetro’s condominium dues
Philippines Inc. v. Circular providing for a Commissioner of Internal Revenue condominium dues are are not subject to EWT. The RMC
CIR | CTA Case No. particular tax scheme assessed Officemetro Philippines liable for excluded from providing for such tax was issued only
8382, June 3, 2014 cannot be applied deficiency expanded withholding tax Officemetro’s rentals after that taxable year, and cannot be
retroactively. The (EWT), deficiency final withholding value subject to EWT applied retroactively.
invalidity of an added tax (VAT), and deficiency final (2) Whether Officemetro
assessment must be withholding tax (FWT). Officemetro filed a should be held liable for HOWEVER, Officemetro should still be
proven by the claimant, petition at the Court of Tax Appeals (CTA) deficiency EWT on rental held liable for deficiency EWT on rental
otherwise, the to set aside the assessment. The CTA in expense; deficiency FWT expense because it did not prove that
assessment remains valid division only partially granted the petition, of VAT and for total the assessment is invalid. An
absent any showing of which prompted Officemetro to file a deficiency FWT assessment is presumed to be valid
arbitrariness or petition for review for the CTA en banc. prima facie as long as it does not show
capriciousness. arbitrariness or capriciousness.
Officemetro should be held liable for

deficiency FWT of VAT and for total
deficiency FWT. Its main argument on
this issue is that its administrative
services were performed by a non-
resident foreign corporation.
However, the evidence it presented
was self-serving and failed to prove

such allegation.
Deutsche Bank-AG Non-compliance with the Deutsche bank asked for a refund of taxes, Whether the failure to No. Non-compliance with the 15-day
Manila Branch v. CIR 15-day period for prior believing that it made an overpayment of apply for a tax treaty relief period for prior application should not
| G.R. No. 188550, application should not the branch profit remittance tax of 15% (RMO No. 01-2000) will operate to automatically divest
August 19, 2013 operate to automatically and requested a confirmation of its deprive corporations of entitlement to the tax treaty relief,
divest entitlement to the entitlement to the preferential tax rate of the benefit of a tax treaty especially in claims for refund. At most,
tax treaty relief, especially 10% under the RP-Germany Tax Treaty. the application for a tax treaty relief
in claims for refund. The CTA ruled that prior application for a from the BIR should merely operate to
tax treaty relief is mandatory, and confirm the entitlement of the
noncompliance with this prerequisite is taxpayer to the relief.
fatal to the taxpayer's availment of the
preferential tax rate. The obligation to comply with a tax
treaty must take precedence over the
objective of RMO No. 1-2000. Hence,
by virtue of the RP-Germany Tax
Treaty and considering that Deutsche
Bank has met all conditions under said
Treaty, we are bound to extend to its
branch in the PH the preferential rate
of 10%. Therefore, CIR is ordered to
refund or issue a tax credit certificate

in favor of Deutsche Bank.
CIR v. General Foods It is not an ordinary and General Foods Corporation is engaged in Whether the media It is not deductible. To be deductible,
(Phil.) Inc. | G.R. No. necessary expense and the manufacture of beverages. In its advertising expense for an advertising expense should not
143672, April 24, thus, not deductible if the income tax return, it claimed as deduction “Tang” was “necessary only be necessary but also ordinary.
2003 subject advertisement is the amount of P9,461,246 for media and ordinary” fully The subject expense for the
one designed to advertising for “Tang”. The Commissioner deductible under the advertisement of a single product to
stimulate the future sale disallowed 50% of the deduction and was NIRC or was it a capital be inordinately large, and even if
of merchandise or use of assessed for deficiency income taxes expenditure indeed it is necessary, it cannot be
services. since the expense for advertisement of a considered an ordinary expense
singular product was gargantuan and was deductible. The subject advertisement
not reasonable to stimulate the current is one designed to stimulate the future
sale of merchandise. sale of merchandise or use of services.
The said venture of respondent to
protect its brand franchise was
tantamount to efforts to establish a
reputation and is akin to the
acquisition of capital assets, and
should not, therefore, be considered
as business expenses but as capital
expenditures which normally should
be spread out over a reasonable
period of time.

The Late Lino To be deductible, an Gutierrez was engaged in the business of Whether the deduction is The transportation expenses which
Gutierrez expense must be (1) leasing real property. CIR assessed against proper petitioner incurred to attend the
substituted by ordinary and necessary; Gutierrez deficiency from deductions from funeral of his friends, cost of admission
Andrea C. vda. De (2) paid or incurred within gross income representing depreciation. tickets to operas, and procurement
Gutierrez et al v. the taxable year; and, (3) Expenses Gutierrez allegedly incurred in and installation of an Iron door to his
Collector of internal paid or incurred in carrying on his business, and the addition residence were expenses relative to his
Revenue | G.R. No. carrying on a trade or to gross income of receipts which he did personal and social activities rather
L-19537. May 20, business. not report in his income tax returns. than to his business of leasing real
1965 estate. Personal, living, or family
Personal, living, or family expenses are not deductible.
expenses are not
deductible. However, the cost of furniture given by
the taxpayer as commission in
furtherance of a business transaction,
the expenses incurred in attending the
National Convention of Filipino
Businessmen, luncheon meeting and
cruise to Corregidor of the
Homeowners' Association, were
shown to have been made in the
pursuit of his business. Commissions
given in consideration for bringing
about a profitable transaction are part
of the cost of the business transaction
and are deductible.

CIR v. Isabela
Cultural Corp | GR. Expenses not being Isabela Cultural Corp received an Whether CA is correct in No. Revenue Audit Memorandum
No. 172231, claimed as deductions in assessment for deficiency in income tax sustaining the deduction Order No.1-2000 provides that under
February 12, 2007 the current year when and expanded withholding tax for 1986. of the expenses form ICC the accrual method of accounting,
they are incurred cannot The former arose from disallowance of ICC gross income and WON expenses not being claimed as
be claimed as deductions claimed expenses deductions for ICC withheld the required deductions in the current year when
from the income for the professional and security services. The tax from the deduction they are incurred cannot be claimed as
succeeding year latter allegedly due to the its failure to for security services deductions from the income for the
withhold expanded withholding tax on its succeeding year.
claimed deductions.
The finding of the CTA and CA that no
CA: The services were rendered in 1984 such understatement exist and that
and 1985, the cost of was not yet only simple interest computation and
determinable at that time, hence, it could not a compounded one should have
be considered as deductible expenses been applied by the BIR. There is no
only in 1986. indeed no stipulation between the
latter and ICC on the application of
Petitioner: ICC is using the accrual compound interest. Under Article 1959
method; the expenses that accrued in of the Civil Code, unless there is a
1984 and 1985 should have been declared stipulation to the contrary, interest
as deductions from income of those years, due should not further earn interest.
barring the latter from claiming the same
as deductions for 1986.

H. Tambunting Whether Tambunting is
Pawnshop Inc. v. CIR The requisites for the H. Tambunting Pawnshop, Inc. was entitled to deductions Tambunting did not properly prove
| G.R. No. 173373, deductibility of ordinary ordered to pay deficiency income taxes in that it had incurred losses.
Jul. 29, 2013 and necessary business the amount of ₱4,536,687.15 for taxable
expenses are: (a) they year 1997, plus 20% delinquency interest The subasta books it presented did not
must be ordinary and computed from August 29, 2000 until full reflect the true amounts of the
necessary; (b) paid or payment. proceeds of the auctions due to
incurred during the certain items having been left unsold
taxable year; (c) paid or Tambunting argues that the CTA should after the auctions.
incurred in carrying on have allowed its deductions because it
the trade or business of had been able to point out the provisions The rematado books did not also
the taxpayer; and (d) of law authorizing the deductions; that it prove the amounts of capital because
supported by pertinent proved its entitlement to the deductions the figures reflected therein were only
papers. through all the documentary and the amounts given to the pawnees.
testimonial evidence presented in court;
and that that the CTA had allowed The security/janitorial expenses were
deductions for ordinary and necessary not duly substantiated. Tambunting
expenses on the basis of cash vouchers should have presented the official
issued by the taxpayer or certifications receipts or invoices.
issued by the payees evidencing receipt of
Petitioner’s management and
interest on loans as well as agreements
professional fees were disallowed as
relating to the imposition of interest.
these were supported merely by cash
vouchers.
Tambunting's claim for deductions

due to losses from fire and theft were
rejected. What was required was the
sworn declaration of loss.

Plaridel Surety and Loss is deductible only in Petitioner Plaridel Surety is a domestic Whether petitioner can No. Petitioner was duly compensated
Insurance Company the taxable year it actually corporation engaged in the bonding claim P44,490 as a for otherwise than by insurance- thru
v. CIR | G.R. No. L- happens or is sustained. business. deductible loss from its the mortgage in its favor executed by
21520, December However, if the loss is Petitioner and Constancio San Jose gross income. San Jose and Cuervo and it had not yet
11, 1967 compensable otherwise (principal), solidarily executed a exhausted all its available remedies,
than by insurance, performance bond in favor of the Galang especially as against Cuervo to
deduction for the loss Machinery to secure the performance of minimize its loss.
suffered is postponed to San Jose contractual obligation to
a subsequent year, which produce and supply logs. Petitioner LOSS is deductible only in the taxable
to be precise, is that year required San Jose and Ramon Cuervo to year it actually happens or is sustained.
in which it appears that execute an indemnity agreement, However, if it is compensable by
no compensation at all solidarity to indemnify petitioner for insurance or otherwise deductions for
can be had, or that there whatever liability it may incur by reason of the loss suffered is postponed to a
is a remaining or net loss, said performance bond. San Jose subsequent year, with, to be precise, is
i.e., no full compensation. constituted a chattel mortgage on that year in which it appears that no
logging machineries and other movables compensation at all can be had, on
in petitioners favor while Ramon Cuervo that there is a remaining or net loss.
executed a real estate mortgage.
San Jose failed to deliver the logs to

Galang Machinery and sued on the
performance bond.
Petitioner in his income tax claimed that
the amount P44,490 as deductible loss
from its gross income.

Philippine Refining
Company (now You must be able to Philippine Refining Company was Whether the requirement No. There are steps to be undertaken
known as Unilever) prove the worthlessness assessed by the CIRE to pay a deficiency that the debt must be by the taxpayer to prove that he
v. CA | G.R. No. of the debt before it can tax for the year 1985 in amount of 1, 892, ascertained to be exerted diligent efforts to collect the
118794, May 8 1996 be deductible as bad 584PHP. PRC protested the the amounts worthless were met for it debts : (1) sending of statement of
debts. are bad debts and interest expense which to be deductible accounts; (2) sending of collection
are allowable legal deductions. But CIR letters; (3) giving the account to the
Ignored it and issued a warrant of lawyer for collection; (4) filing a
garnishment against PRC’s deposits at collection case in court. The only
City trust bank. evidentiary support given by the PRC
for its aforesaid claimed deductions
was the justification posited by its
financial adviser. Not a single
document was offered to show that
the Remoblas Store and CM variety
Store were burned, not even a police
affidavit attesting to such loss by fire.
For the subsequent accounts there are
as well no document shown to prove
that indeed they are worthless.

China Banking Capital losses are allowed Petitioner made a 53% equity investment Whether the investment No. An equity investment is a capital,
Corporation v. CA, to be deducted only to in the First CBC Capital. should be classified as not ordinary, asset of the investor, the
CIR and CTA | the extent of capital gains being “worthless” which sale/exchange of which results in
G.R. No. 125508 and not from any other When Banko Sentral conducted an may be a treated as bad either a capital gain or loss. The gain
July 19, 2000 income of the taxpayer. examination of the financial books and debt or an ordinary loss or loss is ordinary when the property
investment portfolios of petitioner, it was sold or exchanged is not a capital
shown that First CBC has become asset. Thus, shares of stock would be
insolvent. With the approval of Bangko ordinary assets only to a dealer in
Sentral, petitioner wrote-off as worthless securities or a person engaged in the
its investment in First CBC, in its ITR and purchase and sale of, or an active
treated it as a bad debt or as an ordinary trader in securities. In the hands of
loss deductible from its gross income. another who holds the shares of stock
as an investment, the shares would be
CIR disallowed the deduction and capital assets. The loss sustained by
assessed petitioner for income tax the holder of the securities, which are
deficiency on the ground that the capital assets, is to be treated as
investment should not be classified as capital loss as if incurred from a
being "worthless" because First CBC could sale/exchange transaction.
still exercise its financing and investment
activities. Even assuming that it had
become worthless, it should be classified
as “capital loss.”

CIR v. Bicolandia It is clear that the The Senior Citizens Act provided for a Whether the 20% The definition of the term "tax credit"
Drug Corp | G.R. No. lawmakers intended the 20% discount for senior citizens in provision in the Senior is plain and clear. The discussions of
148083, July 21, grant of a tax credit to medicines, with an opportunity for drug Citizens Act should be the lawmakers clearly showed the
2006 complying private companies to claim the same as tax credit. construed as tax credit or intent that the cost of the 20 percent
establishments. However, BIR interpreted “tax credit” in tax deduction discount may be claimed by the
the RR to mean “tax deduction.” Now private establishments as a tax credit.
Bicolandia filed a claim for tax credit, It is clear that the lawmakers intended
raising the issue that the RR was mistaken. the grant of a tax credit to complying
private establishments like the
respondent.
Kuenzle & Streiff Inc Bonuses to employees Petitioner filed its income tax return for Whether the bonuses in No. It is a general rule that bonuses to
v. Collector of made in good faith and as the years 1953-1955, from which the CIR question were reasonable employees made in good faith and as
Internal Revenue | additional compensation filed for deficiency of income taxes as it and just to be allowed as additional compensation for the
G.R. Nos. L-12010 & for the services actually disallowed the bonuses paid by petitioner a deduction services actually rendered by the
L-12113, October rendered by the to its officers to be treated as deductible employees are deductible, provided
20, 1959 employees are expenses. The grounds for disapproval such payments, when added to the
deductible, provided such were that they were not ordinary, not stipulated salaries, do not exceed a
payments, when added to necessary, and unreasonable expenses, reasonable compensation for the
the stipulated salaries, do contrary to Sec. 30(a)(1) of the NIRC. services rendered.
not exceed a reasonable
compensation for the Petitioner sought for the review of the There is no fixed test for determining
services rendered. assessments with the CTA which favored the reasonableness of a given bonus
the CIR but lowered the tax due in 1954. as compensation. In arriving at its
Petitioner contested, arguing that the Tax decision, the CTA considered the fact
Court's ruling is not in accordance with the that (1) there were no evidence that
usual pattern in determining the the paid officers contributed
reasonableness of a given compensation materially to the success of the
because it ignored the nature, extent and petitioner's business, (2) the other
quality of the services actually rendered employees received no pay increase,
by the resident officers and employees. and (3) the bonuses were paid even

when the company suffered losses for
3 years.
Paper Industries
Corp of the There is no such Petitioner is a Philippine corporation Whether petitioner is The Supreme Court denied the tax
Philippoines v. CA. thing as carrying over of registered with the Board of Investment as liable to pay transaction exemption on transaction tax claimed
CIR and CTA | G.R. net losses outside of a preferred pioneer enterprise with tax by Picop since the law from which it
Nos. L- 12010 and L- Board of Investment respect to its integrated pulp and paper claims exemption excludes income tax,
12113, December 1, registered enterprises. mill, and as a preferred pioneer enterprise Whether petitioner is and transaction tax is considered an
1995 Losses may only be with respect to its integrated plywood and entitled to deduct against income tax.
deducted against current veneer mills. It received two letters of current income net
income in the taxable assessment for deficiency from the operating losses incurred On Picop’s claim of deduction for net
year when such losses Commissioner of Internal Revenue. Picop by Rustan Pulp and Paper operating loss incurred by RPPM, the
were incurred. Moreover, protested these assessments claiming tax Mills, Inc. Court declared that it cannot be
transaction tax is exemptions under RA No. 5186 and an considered a deduction in favor of
considered income tax entitlement to deductions for net Picop since there is no such thing as a
which is not exempt operating loss incurred by Rustan and carry-over of net operating loss.
under RA No. 5186. Paper Mills (RPPM), which is a different Losses must be deducted against
and separate entity, that Picop later on current income in the taxable year
acquired. when such losses were incurred. R.A.
No. 5186 introduced the carry-over of
net operating losses as a very special
incentive to be granted only to
registered pioneer enterprises and
only with respect to their registered
operations.

Hospital de San Juan Commissioner of Internal Revenue Whether expenses
de Dios, Inc. v. CIR | The principle of allocating assessed and demanded from the incurred by the petitioner Hospital de San Juan De Dios, Inc.,
G.R. No. L-31305, expenses is grounded on petitioner, Hospital De San Juan De Dios,
income consisting solely according to its Articles of
May 10, 1990 the premise that the Inc., payment of P51,462 as deficiency of dividends and Incorporation, was established for
taxable income was income taxes for 1952 to 1955. interests, were not purposes "Which are benevolent,
derived from carrying on expenses incurred in charitable and religious, and not for
a trade or business, as The petitioner protested against the "carrying on any trade or financial gain". It is not carrying on a
distinguished from mere assessment and requested the business," hence, not trade or business for the word
receipt of interests and Commissioner to cancel and withdraw it. deductible as business or "business" in its ordinary and common
dividends from one's The request was, however, denied administrative expenses. use means "human efforts which have
investments, said income for their end living or reward; it is not
should not share in the The petitioner appealed the decision commonly used as descriptive of
allocation of before the Court of Tax Appeals (CTA). The charitable, religious, educational or
administrative expenses. CTA rendered a decision declaring that social agencies" or "any particular
“petitioner failed to establish by occupation or employment habitually
competent proof that its receipt of engaged in especially for livelihood or
interests and dividends constituted the gain" or "activities where profit is the
carrying on of a "trade or business" so as purpose or livelihood is the motive."
to warrant the deductibility of the
expenses incurred in their realization.”

CIR v. Central Luzon Pursuant to RA 7432, BIR issued RR2-94 Whether respondent may
Drug Corporation | Tax credit is different which granted 20% sales discount to claim the 20% senior Yes. RA 7432 expressly allows private
GR No. 159610 from Tax deduction. Tax qualified senior citizens on their purchases citizens’ sales discount as establishments to claim the amount of
June 12, 2008 credit reduces the tax due of medicines covering the calendar year a tax credit deductible discounts they grant to senior citizens
and tax deduction 1997. from future income tax as tax credit.
reduces the income liabilities instead of a
Respondent, filed a claim for refund or
subject to tax in order to mere deduction from RA 7432 explicitly provides that senior
credit of overpaid income tax for taxable
arrive at the taxable gross income or gross citizens are granted 20% from
year 1997, alleging that the overpayment
income. Since the clear sales mentioned establishments and such
was the result of wrongful implementation
wording of RA 7432 is the establishments may claim the cost as
of the said law because it treated the 20%
grant of private tax credit which in a sense is a peso-
sales discount as a deduction from gross
establishments to claim for peso reduction from a tax payer’s
sales instead of treating as a tax credit as
the amount of discounts tax liability.
provided under Sec 4(a) of RA 7432.
as tax credit, RR 2-94
cannot treat it otherwise. Respondent also reasoned that RR 2-94
However RR 2-94 interpreted tax
which is a mere implementing
credit as a tax deduction which is only
administrative regulation, where the
a subtraction from gross income
application of tax deduction instead of tax
resulting in a lower taxable income.
credit, cannot modify, alter or amend the
mandate of RA 7432.
Thus, it basically treats the discount as
an allowable deduction.

CIR v. Philippine Taxable income, the basis PAL filed in 2000 its Tentative Corporate Whether PAL is liable for No. Section 13(a) of PD 1590 refers to
Airlines Inc. | G.R. for basic corporate Income Tax Return, reflecting zero taxable Minimum Corporate "basic corporate income tax” (BCIT).
No. 179259, Sep 25, income tax under Sec. 27 income for said year. In 2003, PAL received Income Tax Even if BCIT and the MCIT are both
2013 (A) is distinct from gross a computation of initial deficiency MCIT income taxes under Section 27 of
income, which is the basis Assessment and consequently, a NIRC, the two are distinct. The intent
for the Minimum Preliminary Assessment Notice was issued of Section 13 is to extend to PAL tax
Corporate Income Tax to which PAL filed a written protest. concessions not ordinarily available to
under Section 27 (E). Thereafter, PAL received a Formal Letter of other corporations by permitting PAL
Demand for payment. PAL argued that it to pay whichever is lower of the BCIT
is not subject to the 2% MCIT by virtue of or the franchise tax; and the tax so paid
its charter, and that the three-year period shall be in lieu of all other taxes.
allowed by law for BIR to assess deficiency Further, the Substitution theory does
internal revenue taxes for the taxable year not apply for it is not the fact of
ending March 2000 had already lapsed. payment that exempts PAL but the
Since CIR made no action in relation to exercise of its option. Finally, the
PAL’s protest, PAL filed a petition for provision in PD 1590 on Net Loss
review before the CTA. Carry-over would be nugatory if PAL
us subjected to MCIT.

TOPIC FIVE: ACCOUNTING PERIOD; METHODS OF ACCOUNTING; TAX RETURNS AND PAYMENT OF TAX
Maria Carla A donation made by a Dela Rama Steamship Co. insured the life of Whether the donees' gift Yes. Nothing in records shows that
Pirovano v. CIR | corporation to the heirs of said Enrico Pirovano, who was then its taxes as assessed by late Enrico Pirovano was not fully
G.R. No. L-19865, a deceased officer out of President and General Manager until his respondent as well as compensated for services he rendered.
July 31, 1965 gratitude for his past death, with various Philippine and the imposition of "The fact that his services contributed
service is subject to the American insurance companies designating surcharge and interest in a large measure to the success of
donees' gift tax. itself as the beneficiary. on the amount of the company did not give rise to a
donees' gift taxes was recoverables debt, and the
Consequently the BOD o renounced all its proper conveyances made by the company to
rights title, and interest amount of his heirs remain a gift or donation. The
insurance proceeds in favor of the minor resolution emphasized that "out of
children of the deceased. Mrs. Pirovano, in gratitude" the company decided to
behalf of her children, executed a public renounce in favor of Pirovano's heirs
document formally accepting the donation; the proceeds of the life insurance
and the Company through its BOD, took policies. The true consideration for the
official notice of this formal acceptance. donation was, therefore, the
company's gratitude for his services,
CIR assessed the donees' gift tax, inclusive and not the services themselves.
of surcharges, interests and other penalties, Whether remuneratory or simple, the
against each of the petitioners-appellants. conveyance remained a gift, taxable
And the donor's gift tax was also assessed under Chapter 2, Title III of the Internal
against Steamship Co., which the latter Revenue Code.
paid.

Carmelino F. The law cannot be given
Pansacola v. CIR | retroactive effect. It is Petitioner filed his income tax return for the Whether the increased The petition is denied. At the time
G.R. No. 159991, established that tax laws taxable year 1997 that reflected an personal and additional petitioner filed his 1997 return and
November 16, 2006 are prospective in overpayment. He claimed the increased exemptions under the paid the tax due thereon in April 1998,
application, unless it is amounts of personal and additional NIRC (which took effect the increased amounts of personal
expressly provided to exemptions under Section 35 of the NIRC, in 1998) can be availed and additional exemptions in Section
apply retroactively. although his certificate of income tax for purposes of 35 were not yet available. It has not yet
withheld on compensation indicated the computing income tax accrued as of December 31, 1997,
lesser allowed amounts on these liability for the taxable which is the last day of his taxable year.
exemptions. year 1997 Petitioner's taxable income covers his
income for the calendar year 1997. In
BIR and the Court of Tax Appeals denied his the NIRC, the Court noted that there is
claim because it would be absurd to allow no specific mention that the increased
the deduction from a taxpayer's gross amounts of personal and additional
income earned on a certain year of exemptions under Section 35 shall be
exemptions availing on a different taxable given retroactive effect.
year. The CA further ruled that the NIRC
took effect on January 1, 1998, thus the
increased exemptions were effective only
to cover taxable year 1998 and cannot be
applied retroactively.

CM Hoskins & Co, 1. Inordinately large CMHCI, in filing their ITR, claimed as a Whether the Yes. It is non-deductible. Otherwise,
Inc v. CIR | G.R. No. payments of deductible expense 99,971.91php that it 99,977.91php paid to Hoskins would receive on these three
L-24059. November compensation could not paid to Hoskins, who owned 99.6% of its C.M. Hoskins is a items alone (salary, bonus and
28, 1969.) be accorded the stock and is also its founder, representing distribution of earnings supervision fee) a total of P184,977.91,
treatment of ordinary and 50% of the supervision fees that CMHCI and profits and thus, which would be double CHMCI's
necessary expenses earned. should be disallowed as reported net income of P92,540.25.
allowed as deductible a tax deduction
items under the Tax Code. CIR, whose decision CTA upheld, disallowed Authorization by the board cannot
the claim, saying that the amount was an change the picture considering
2. Bonuses paid in good inordinately large one, which bore a close Hoskins wielded tremendous power
faith are deductible, relationship to the recipient's dominant and influence as Chairman of the
provided such payments, stockholdings and therefore amounted in board and practically an absolutely
when added to the law to a distribution of its earnings and controlling stockholding of 99.6.
stipulated salaries, do not profits.
exceed a reasonable The company policy also provides an
compensation for the CMHCI argued that CMHCI has the right to exception to the ½ equal sharing rule
services rendered. fix the compensation of its officers and when the commission covers general
employees and that the payment was supervision.
authorized by the board pursuant to their
company’s policy of a ½ equal sharing of That right may be conceded, but for
sales commission between the company income tax purposes the employer
and the salesman. cannot legally claim such bonuses as
deductible expenses unless they are
shown to be reasonable. To hold
otherwise would open the gate of
rampant tax evasion.
Jose Ledesma v. CIR A person engaged in a

and the Provincial commercial enterprise has Ledesma made his declaration for the Whether the amount of Yes. The court allowed the deduction
Treasureer of a right to fix the purpose of paying his income tax. He P135,229.10 should be of said amount from the gross income

Occidental Negros | compensation of his claimed certain exemptions including deducted from the gross of Ledesma. A corporation or person
G.R. No. 15014, employees which shall be P135,229.10 for his employees’ income of Ledesma engaged in a commercial enterprise
October 2, 1920 considered part of the compensation for their service. The said has a right to fix the compensation of
expenses in the conduct exemptions were not allowed as the his employees, and said compensation
and management of the Attorney-General alleging that the sums shall be considered as a part of the
business. Such expenses paid to said employees were in the nature expenses in the conduct of the
should be taken into of bonuses or distribution of profit and business. Such expenses should be
consideration in were not expenses of the business. taken into consideration in
ascertaining the amount Ledesma countered that the persons to ascertaining the amount to be paid as
to be paid as income tax. whom he had paid the said sum of income tax.
P135,229.10 were employees of his
business and as such receive a certain fixed In the present case, there is not a word
percentage based on the annual gain of of proof in the record which disproves
Ledesma. the declaration of the plaintiff that the
said sum was paid to the persons
Ledesma paid the amount demanded mentioned in the complaint as
under protests and commenced the action compensation for their services. Said
for recovery of the sum of money. sum, according to the proof, did not
constitute "gifts or bonuses."

Esso Standard Fees collected by the Esso claimed that the margin fees it paid to Whether the margin fees No. The margin fees are not
Eastern Inc. v. CIR | government in the Central Bank on its profit remittances to its are deductible tax or considered as tax which could be
G.R. No. L-28508-9, exercise of its police New York head office are deductible form expense deducted from gross income. RA2009
July 7, 1989 power is not considered gross income either as a tax or as an (An Act to Authorize the Central Bank
tax which could be a ordinary and necessary business expense. of the Philippines to Establish a Margin
deductible item. Further, This was disallowed by the BIR. Over Banks’ Selling Rates of Foreign
for expenses to be Exchange) is an exercise of police
deductible, it must be in power to curb the excessive demands
connection with the upon our international reserve in order
production or earning of to stabilize the currency, by
the company, or in discouraging imports and
furtherance of its trade or encouraging exports.
business.
Moreover, it is not also expenses in
connection with the production or
earning of Esso’s incomes in the
Philippines. Such were expenses
incurred for the remittance of said
incomes to its head office to be
disposed abroad. Additionally, Esso
has not shown that the remittance was
made in furtherance of its own trade
or business.

Visayan Cebu Representation Petitioner filed its income tax return for Whether the sum of No. It appears, among others: (a) that
Terminal Co, Inc. v. expenses fall under the 1951 reporting a gross income of P75,855.88 as part of the alleged representation
CIR | G.R. L – 12798, category of business P420,633.40 and claimed deductions representation expenses expenses had never had any
May 30, 1960 expenses which are amounting to P379,036.95, leaving a net should be part of the supporting paper; (b) that the
allowable deductions income of P41,596.45 on which it paid allowable deductions vouchers and chits covering other
from gross income if they income tax in the sum of P8,319.29. representation expenses had been
meet the conditions allegedly destroyed; (c) that there is no
prescribed by law; that, to However, “the said sums of P2,375.00, documentary evidence on record of
be deductible, said P75,855.88 and P6,300.00, representing any of the representation expenses in
business expenses must said salaries, representation expenses and question; and (d) that no testimonial
be "ordinary and miscellaneous expenses, respectively, or a evidence has been introduced on any
necessary expenses paid total of P84,530.88, were disallowed by the specific item of said alleged expenses.
or incurred in carrying on CIR, thus giving rise to a deficiency
any trade or business”. assessment of P18,991.00. Thus, it is not possible to determine
the actual amount covered by
Upon request for reconsideration, CIR supporting papers and the amount
modified the deficiency income tax without supporting papers; and the
assessment by allowing the deduction from court is justified to determine from all
petitioner’s gross income in the sum of available data the amount properly
P1,875.00 and miscellaneous expenses deductible as representation
amounting to P532.00, at the same time expenses.
maintaining the disallowance of the full
amount of P75,855.88 as representation
expenses.

CIR v. Carlos The 30-day period under An appeal by the Government from CTA Whether the petitioner's Yes. The 30-day period under Sec11 of
Palanca Jr | G.R. No. Section 11 of RA 1125 decision ordering CIR to refund P20,624.01 contention on RA 1125 did not even commence to
L-16626, October would not even for alleged overpayment of income taxes in prescription untenable. run in this incident. It originally
29, 1966 commence to run if the 1955. assessed the claimant for gift tax
case is filed with CTA even liabilities, it was subsequently
before it had been denied Two claims for refund: abandoned. In the new assessment,
by BIR. (1) on November 10, 1956, on interest paid claimant was charged with an entirely
on donee's gift tax P17,885.10, new liability with different amounts.
The computation of the (2) on August 12, 1958, on interest paid on The period should start from receipt of
two-year prescriptive the estate and inheritance tax final denial by BIR. The case was filed
period, under Section 306 P20,624.01 with the CTA on August 13, 1958 while
of NIRC, should be from denial of the case was on July 24, 1959.
the date of the last CIR contends that the prescriptive period
installment. started on October 14, 1947 when denial by The computation of the two-year
BIR of the claim for refund became final. prescriptive period, under Section 306
Since the case was filed with CTA only on of NIRC, should be from the date of
August 13, 1958, then it is outside the 30- the last installment. Palanca paid the
day period under Sec11. last installment on his 1955 income tax
account on August 14, 1956. His claim
Also on (1), under Sec306 NIRC, the for refund of the alleged overpayment
amounts paid by under claimant’s withheld on it was filed with the court on
tax and on May 11, 1956, he may no longer August 13, 1958. It was, therefore, still
be refunded since it was filed in court on timely instituted.
August 13, 1958, or beyond two years from
payment.

Philex Mining Corp
v. CIR | G.R. No. Deductions for income tax Philex Mining agreed to manage and Whether the amounts Baguio Gold’s debts were not yet due
148187, 16 April purposes partake of the operate Baguio Gold’s mining claim. The paid by Philex as and demandable at the time Philex
2008 nature of tax exemptions mine suffered continuing losses over the guarantor to Baguio paid the same. Verily, Philex pre-paid
and are strictly construed years which resulted in Philex's withdrawal Gold’s creditors are Baguio Gold’s outstanding loans to its
against the taxpayer, who as manager of the mine. Inevitably, the deductible as bad debts bank creditors and this conclusion is
must prove by convincing eventual cessation of mine operations supported by the evidence on record.
evidence that he is came to pass.
entitled to the deduction Thus, Philex cannot claim the advances
claimed. In the course of managing and operating as a bad debt deduction from its gross
the mine, Philex made advances of cash income. Deductions for income tax
and property which remain unpaid. Philex, purposes partake of the nature of tax
as the guarantor, also paid the creditors of exemptions and are strictly construed
Baguio Gold. against the taxpayer, who must prove
by convincing evidence that he is
Since Baguio Gold was unable to pay, Philex entitled to the deduction claimed.
wrote-off in its books its receivables from
Baguio Gold, comprising the advances and Philex failed to substantiate its
payments made to the creditors. Philex assertion that the advances were
further claimed as deduction in its ITR that subsisting debts of Baguio Gold that
these bad debts have been written-off. could be deducted from its gross
income. Consequently, it could not
The BIR disallowed the deduction. claim the advances as valid bad debt
deduction.
Fernandez When the allowances shall Fernandez Hermanos, Inc., is a domestic- Whether the Tax Court No. The CIR questions the taxpayer’s
Hermanos, Inc. v. equal the capital invested, corporation engaging in business as an was correct in its ruling writing off as worthless securities the
CIR and CTA | G.R no further allowances investment company. When the CIR regarding the disputed cost of shares of stock of Mati Lumber
No. L-21551, shall be made. In other assessed the income taxes for the years items of disallowances Co. when its worthlessness had not
September 30, 1969 words, the "capital 1950 – 1954. It found some alleged been clearly established. It found that
investment" was but the discrepancies upon the examination and when the company ceased to operate

limitation of the amount verification of its income tax returns. it was insolvent. This insolvency of the
of depletion that could be Company reflected in its 1950 tax
claimed. The Tax Court sustained the following return. It appears that certain items
losses: losses in or bad debts of Palawan remained in petitioner's books as
Manganese Mines Inc., losses in Hacienda outstanding liabilities of creditors.
Samal and excessive deprecation of houses. These increases were not taxable
increases in net worth, as they were
It overruled the Commissioner’s not the result of the receipt by it of
disallowances of the other items. After the unreported or unexplained taxable
modification, it was found that the total income, but were shown to be merely
deficiency income taxes due from the the result of the correction of errors in
taxpayer for the years under review to its entries in its books relating to its
amount to P123,436.00 instead of indebtedness to certain creditors.
P166,063.00 as originally assessed by the
Commissioner. Both parties appealed from
the respective adverse rulings against
them.
Consolidated While taxable income is The CIR, questions what he characterizes as Whether the company No. The Company was not using a
Mines, Inc. v. CTA based on the method of the "hybrid" or "mixed" method of uses accrual method or a hybrid method of accounting, but was
and CIR | G.R. Nos L- accounting used by the accounting utilized by the Company, in hybrid method of consistent in its use of accrual method
18843 and L-18844, taxpayer, it will almost treating the share of Benguet in the net accounting of accounting.
August 29, 1974 always differ from profits from the operation of the mines in We have to distinguish between (1)
accounting income. This is connection with its income tax returns. the method of accounting used by the
so because of a Company in determining its net
fundamental difference in The Company used the accrual method of income for tax purposes; and (2) the
the ends the two concepts accounting in computing its income. One of method of computation agreed upon
serve. Accounting its expenses is the amount paid to Benguet between the Company and Benguet in
attempts to match cost as mine operator, which amount is determining the amount of
against revenue. Tax law is computed as 50% of "net income." The compensation that was to be paid by
aimed at collecting Company deducts as an expense 50% of the former to the latter. The parties,

revenue. Thus, the tax law cash receipts minus disbursements, but being free to do so, had contracted
will not recognize does not deduct at the end of each that in the method of computing
deductions for contingent calendar year what the Commissioner compensation the basis were "cash
future losses except in alleges is "50% of the share of Benguet" in receipts" and "cash payments."
very limited situations. the "accounts receivable." However, it
Good accounting, on the deducts Benguet's 50% if and when the Since Benguet had no right to half of
other hand, requires their "accounts receivable" are actually paid. It the "Accounts Receivable," the
recognition. would seem, therefore, that the Company Company was correct in not accruing
has been deducting a portion of this said half as a deduction.
expense on the "cash & carry" basis.
Antonio Roxas, Real estate dealer refers Don Pedro Roxas transmitted to his Whether Roxas y Cia can No. It was an isolated transaction with
Eduardo Roxas and to persons engaged in the grandchildren several properties. To be considered a real peculiar circumstances. Although
Roxas y Cia v. CTA business of buying, manage the properties, said children estate dealer hence there were hundreds of vendees and
and CIR | G.R. No. L- selling, exchanging, formed a partnership called Roxas y liable for the payment of their respective holdings were paid in
2504 , April 26, leasing or renting Compania. deficiency income for installment, it would not make Roxas y
1968 property as principal and the sale of Nasugbu Cia a real estate dealer during the 10-
holding himself out as a The CIR demanded the payment of farmlands year amortization period. The sale of
full or part-time dealer or assessed deficiency income taxes for 1953 the Nasugbu farmlands to the very
as an owner of properties and 1955 due to the unreported 50% of the farmers who tilled them for
rented for an aggregate net profits derived from the sale of the generations was pursuant to the policy
amount of three thousand Nasugbu farmlands to the tenants and the of our Government to allocate lands to
pesos or more a year. disallowance of deductions from gross the landless.
income of various business expenses. CIR
considered the partnership as engaged in Therefore, Roxas y Cia, cannot be
the business of real estate because they considered a real estate dealer for the
subdivided the farmlands and sold them on sale in question. Pursuant to Section
installment, hence, 100% of the profits 34 of the Tax Code the lands sold to
derived therefrom must be taxed. the farmers are capital assets, and the
gain derived from the sale thereof is
The Roxas brothers protested but was capital gain, taxable only to the extent

denied. They appealed to the CTA. CTA of 50%.
sustained the assessment.
Eufemia Evangelista A joint venture need not Petitioners Evangelista sought for the Whether petitioners Yes. Petitioners have agreed to and
et al v. CIR and CTA be undertaken in any of reversal of the decision of the Court of Tax have established a has actually contributed money to a
| G.R. No. L-9996 the standard forms or in Appeals (CTA) which held them liable for partnership and are common fund for the purpose of
October 15, 1957 conformity with the usual income tax, real estate dealer’s tax and liable to corporate tax engaging in real estate transactions
requirements of the law residence tax for the real properties under Section 24 of the for monetary gain which were to be
on partnerships in order purchased from 1943 to 1994 from NIRC divided amongst themselves. The
that one could be deemed different persons. The management of said following observations proved to
constituted for purposes properties was charged to their brother support such conclusion: (1) said
of tax on corporations. who subsequently rented out the common fund was not something they
properties to several tenants from 1945- found already in existence; (2) they
1949. invested in a series of transactions, and
not merely in a single transaction; (3)
Petitioners alleged that they were mere co- the properties were not devoted to
owners and not partners because there was residential purposes, or to other
no legal entity formed since some of the personal uses of petitioners.
characteristics of partnership were not
present in their case. Hence, they should be For purposes of tax on corporations,
excluded from the coverage of Section 24 The Tax Code includes partnerships -
of the National Internal Revenue Code of with the exception only of duly

the Philippines (NIRC). registered general co-partnerships -
within the purview of the term
“corporation”. When
Petitioners constituted a partnership

insofar as the Tax Code is concerned
and are therefore subject to income
tax for corporations.
Alexander Howden Reinsurance premiums Commonwealth Insurance Co. (CICO) Whether portions of Yes. The portions of premiums earned
& Co. LTD, H.G. are determinable, entered into a reinsurance contract with premiums earned from are subject to income tax. Income
Chester & Others, et because they may be different British Insurance companies locally underwritten means any flow of wealth, or inflows
al. v. Collector of calculated based on represented by Alexander Howden & Co., insurance contracts which are not mere returns of capital.
Internal Revenue | contract, and periodical, (AHCO) a non-resident foreign corporation. pursuant to reinsurance Furthermore, the source of the income
G.R. No. L-19293, because they are remitted By virtue of such contract, CICO remitted to contracts with a non- was the reinsurance contract which
April 14, 1965 from time to time, income AHCO reinsurance premiums, and resident foreign took place in the Philippines, and thus
and thus may be subject representing AHCO, paid the BIR income corporation is subject to is within the nexus of the taxing
to withholding. tax for the calendar year 1951. AHCO filed income tax authority. Being a flow of wealth within
for refund. If subject, WON such Philippine jurisdiction, said income
income may be withheld should properly share the burden of
maintaining the government.
FURTHERMORE, the reinsurance

premiums are determinable and
periodical income—determinable,
because they can be calculated
accurately on the basis of the
insurance contracts; periodical,
inasmuch as they were earned and
remitted from time to time. Pursuant

to law, they may be subject to
withholding.
Marubeni Corp v. CTA is not covered by BP Marubeni, a foreign corporation, had Whether Marubeni was No. Marubeni is not liable for both
CIR and CTA | G.R. 129, because the CTA is equity investments with Atlantic Gulf and liable for such taxes 15% profit remittance tax and to the
No. 76573, created by virtue of a Pacific Co. of Manila (AG&P), a domestic withheld 10% final dividend tax, because
September 14, 1989 special law, RA 1125, and corporation. When AG&P declared and Marubeni should be classified as a
because the CTA was not distributed dividends, it withheld 25% of non-resident foreign corporation that
among those courts the dividend remitted to Marubeni. The is subject to 35% regular tax on non-
specifically mentioned in withholding, according to AG&P, was 10% resident foreign corporations.
Section 2 of BP 129 for final dividends tax and 15% for profit
remittance tax. With this, the withholding It should also be noted that one of the
and the tax imposed on Marubeni’s arguments in the CTA was that
dividend income were questioned. Marubeni’s appeal was not perfected,
because it did not comply with the
reglementary period of appeal
provided in BP 129. But in this case, the
SC clarified that the CTA is not covered
by BP 129, because the CTA is created
by virtue of a special law, RA 1125, and
because the CTA was not among those
courts specifically mentioned in
Section 2 of BP 129.
Chamber of Real Minimum Corporate Petitioner assailed the constitutionality of Whether the MCIT is No. An income tax is arbitrary and
Estate and Builders’ Income Tax (MCIT) is a tax
MCIT under Sec. 27(e) of RA 8424 because confiscatory for being a confiscatory if it taxes capital.
Associations, Inc. v. on gross income, not on using the gross income as the tax base is tax on capital However, MCIT is not a tax on capital.
The Hon. Executive capital. tantamount to a confiscation of capital as Instead, it is imposed on gross income
Secretary Alberto gross income is not “realized gain” unlike Whether RRs ignored which is arrived at by deducting the
Romulo | G.R. No. Final Withholding Tax net income. the different treatment capital spent by a corporation in the
160756, March 9, (FWT) is imposed on the of ordinary assets from sale of its goods (i.e. cost of goods and

2010 sale of capital assets. Further, petitioner sought to nullify capital assets in other direct expenses) from gross sale.
Creditable Withholding provisions from the Revenue Regulations imposing the CWT Clearly, the capital is not being taxed.
Tax (CWT) is imposed on (RRs) (2-1998, 6-2001, 7-2003) prescribing
the sale of ordinary assets. rules for collection of CWT on sale of real No. FWT is imposed on the sale of
properties categorized as ordinary assets, capital assets while CWT is imposed on
claiming that the RRs ignored the different the sale of ordinary assets. The fact
treatment of ordinary and capital assets, that both taxes are withheld at source
and that the levy, collection and payment does not mean that they are treated
of CWT at the time of transaction are the same way. Moreover, taxes
contrary to the provisions of RA 8424 on withheld are in the nature of advance
the manner and time of filing the return, tax payments or installments on the
payment and assessment of income tax annual tax which may be due at the
involving ordinary assets. end of the taxable year. The
withholding agent’s act of collecting
the tax at time of transaction is the
essence of the withholding tax
method.
CIR v. Wander The Philippine Wander Philippines, Inc. is a domestic Whether private Glaro is entitled to the rate of 15%
Philippines, Inc. and counterpart, Wander is corporation organized under Philippine respondent Wander is withholding tax. Switzerland grants to
CTA | G.R. No. L- the proper entity who Laws and remits dividends to its parent entitled to the Glaro a tax credit against the tax due
68375, April 15, should claim for the company, Glaro on which 35% withholding preferential rate of 15% it, equivalent to the difference
1988 refund of overpaid tax was withheld. Wander filed a claim for withholding tax on between the regular 35% rate of the
withholding tax on refund and/or tax credit contending that it dividends declared and preferential 15% rate. Switzerland
dividends remitted by is only liable to 15% withholding tax and remitted to its parent does not impose any income tax on
Glaro. Refunds are not on the basis of 35% which was withheld corporation, Glaro dividends received by Swiss
construed strictly against and paid to and collected by the corporation from corporations
the claimant, however the government. domiciled in foreign countries. The
fact that Switzerland did fact that Switzerland did not impose
not impose any tax or the any tax or the dividends received by
dividends received by Glaro from the Philippines should be

Glaro satisfies the given considered as a full satisfaction of the
condition. given condition. To deny private
respondent the privilege to withhold
only 15% tax provided for under
Presidential Decree No. 369 would run
counter to the spirit and intent of the
law and discourage foreign
corporations from investing capital in
our country.
Cyanamid The term “reasonable Cyanamid Inc., is a corporation organized Whether petitioner is Yes. The Tax Court opted to determine
Philippines, Inc. v. needs of the business” under Philippine laws and wholly owned liable for the the working capital sufficiency by
CA, CTA and CIR | mean immediate needs of subsidiary of American Cyanamid Co. CIR accumulated earnings using the ratio between current assets
G.R. No. 108067, the business. If the demanded the payment of deficiency tax to current liabilities.
January 20, 2000 corporation did not prove income tax.
an immediate need for In order to determine whether profits
the accumulation of the During the pendency of the case, both are accumulated for the reasonable
earnings and profits and parties agreed on a settlement but the needs of the business to avoid the
the accumulation was not surtax remained unresolved. Petitioner surtax upon shareholders, it must be
for the reasonable needs contends that that the surtax for the undue shown that the controlling intention of
of the business, then the accumulation of earnings was not proper the taxpayer is manifested at the time
penalty tax would apply. because the said profits were retained to of accumulation, not intentions
increase petitioner’s working capital and it declared subsequently, which are
would be used for reasonable business mere afterthoughts.
needs of the company.
Furthermore, the accumulated profits
CTA argues that the law permits a stock must be used within a reasonable time
corporation to set aside a portion of its after the close of the taxable year. In
retained earnings for specified purposes. the instant case, petitioner did not
However, petitioner’s purpose for establish, by clear and convincing
accumulating its earnings does not fall evidence, that such accumulation of

within the ambit of any of these specified profit was for the immediate needs of
purposes. the business.

TOPIC SIX: DOF OPINIONS
Re: Review of A person claiming an

BIR Ruling No. exemption has the Nutri-Asia, Inc. (NAI) owns 100% of the Whether Section 40(C)(2) of No. For any gain/loss pursuant to a merger
508-12 dated 3 burden of justifying the outstanding capital stock of NA Prime the NIRC should be applied, to not be recognized, the constituent
August 2012 exemption by words Resources Corporation (NPRC). For hence the merger be tax- corporation must exchange its property
too plain to be mistaken business reasons, they entered into a free solely for the stock of another. In this case,
DOF Opinion and too categorical to merger, with the former as surviving there was no such exchange. A valid
No. 102-2018 be misinterpreted. entity. reorganization alone is not sufficient to
afford non-recognition to the gain/loss in
NAI shall be deemed to have acquired the transaction.
all the assets and assumed all liabilities
of NPRC and the latter shall cease to A person claiming an exemption must justify
exist. the same by words too categorical to be
misinterpreted. Tax exemptions are never
However, since NPRC is a wholly- presumed. The burden lies with the taxpayer
owned subsidiary of NAl, NAI will not to clearly establish such right.
issue any shares in consideration of the
merger. NAI said its non-issuance of The law is clear and we need not liberally
shares in exchange for the assets of construe. Taxation is not favored; never
NPRC was done to avoid the shares presumed. Even if NAI wholly owns NPRC,
from becoming treasury shares, as it both possess separate juridical personalities
would be issuing shares to itself. and are different taxable entities. Imposition
of proper taxes must follow.
NAI also said there is no donation as
there is no intent to donate from NPRC.

Request for
Review of BIR Insufficiency of Nitto Philippines seeks review of BIR’s Whether Nitto Philippines No. Insufficiency of consideration in the
ITAD Ruling No. consideration in the ruling that the transfer of shares of is liable for donor’s tax transaction triggers the applicability of the
070-2018 transaction triggers the stocks from Nitto Japan to Nitto donor’s tax, but this presupposes a transfer
applicability of the Singapore, with the former being the of actual ownership interest to a third party.
DOF Opinion donor’s tax, but this parent company of the latter, is subject Mere change in ownership from one form to
No. 001-2019 presupposes a transfer to donor’s tax as the fair market value another, without it changing hands, is not
of actual ownership of said shares of stocks is greater than considered as actual transfer of ownership to
interest to a third party. the consideration received for the a third person. Here, there was no transfer of
transfer. actual ownership interests by Nitto Japan,
who ultimately remains to be the owner of
the Nitto Philippines, being the 100% owner
of Nitto Singapore.
There is nothing objectionable when a

taxpayer exercises his legal right to decrease
the amount of what otherwise could be his
taxes or altogether avoid them, by means
which the law permits.

Request forThe Court of Tax This refers to the subject letter dated 3 Whether BIR was correct No. The BIR, therefore, erred in including the
Review of BIR Appeals has December 2018 ("Request for Review") when it imposed Aditya gross value of the fully depreciated property
Ruling No. ITAD consistently used the which you filed with this Department Philippines to capital gains and equipment still used in operations in its
094-2018 net book value of assets on behalf of Aditya Birla Minacs tax from the transfer of its computation of the ratio of real property
in computing the Worldwide Ltd. ("Aditya India") to shares since the ratio of real over total assets of Aditya Philippines. It
percentage of real request the review of Bureau of Internal property over total assets should be the net book value of zero instead
DOF Opinion property interest to Revenue ("BIR") Ruling No. ITAD 094- of Aditya Philippines is of the gross value that should be used.
No. 002-2019 determine whether the 2018 dated 22 October 2018. 73.48%
assets of a corporation, Moreover, deposits and advance rental
partnership, trust or Accordingly, since the ratio of real should not be classified as real properties.
estate consist property over total assets of Aditya Deposit accounts which arose from lease
principally of real Philippines as of March 31, 2014 is contracts and serve as collaterals for any
property interest. 73.48% which is more than 50%, Aditya unpaid rent due to the lessor are not
Furthermore, under the Philippines' assets consist principally of classified as immovable properties.
relevant revenue real property under Section 2(b) of RR
regulations, it is the 4-86. Therefore, pursuant to paragraph What are considered real property interest
book value appearing in 4, Article 14 of the Philippines-India tax and/or real properties are limited under
the financial statements treaty, capital gains derived by Aditya Section 3 of RR No. 04-86 and Article 415 of
that should be used as India from the transfer of its shares in the New Civil Code of the Philippines.
basis. Aditya Philippines to Maple UK are
subject to capital gains tax imposed
under Section 28(B)(5)(c) of the Tax
Code.

Request for
Review of BIR The requirement for a Sumimoto Corporation- Tokyo head Whether Sumimoto Yes. First off, the right to receive the
Ruling No. ITAD shareholding to be Office was held to be tax liable on the Corporation is liable for dividends attributable to the subject shares
140-12 "effectively connected" dividends paid by FPIPI to the only the 10% preferential is exercised by Sumitomo Tokyo for the stock
to such a location company. The company now is asking tax rate provided for in the certificates covering the said shares are in
DOF Opinion requires more than for the reversal of the BIRs findings that Philippine-Japan Tax Treaty the name of Sumitomo Tokyo. Also, the
No. 003-2019 merely recording the the dividends paid on the 10% FPIPI General Information Sheet (GlS) of FPIPI lists
shareholding in the shares shall be included shall bbe Sumitomo Tokyo as the owner of the subject
books of the permanent included in the taxable income of shares and has consistently considered
establishment for Sumimoto Corporation, subject to the Sumitomo Tokyo as the owner of the subject
accounting purposes 30% income tax. Said ruling is premised shares and any dividend declared by the
and the "economic" on the idea that the reduced rates former is remitted directly to the latter.
ownership of a holding income tax under the Philippine-Japan Sumitomo Manila does not use or hold for
means the equivalent of Tax Treaty does not apply to the 10% use any share of stock of FPIPI in the conduct
ownership for income subject shares of Sumimoto. which of its trade or business did not receive
tax purposes by a shares are effectively connected with dividends even. It’s not a material factor in
separate enterprise, Sumimoto Manila citing Article 10 para the realization of Sumitomo Tokyo of the
with the attendant 5 of the Philippine Japan Tax Treaty. dividends. Conversely, the BIR was unable to
benefits and burdens. establish any other circumstance supporting
its conclusion that the subject shares should
be considered effectively connected with
Sumitomo Manila.

Request for To be tax exempt under Makati Commercial Estate Association, Whether MACEA is entitled No. For an organization to qualify for the tax
Review of BIR RA No. 9904, an Inc. (MACEA) applied for a tax to tax exemption exemptions under RA 9904, the conditions
Ruling No. 174- association must satisfy exemption of the association dues and under RMC 009-2013 must be met.
2017 the conditions under income derived from rentals of its Moreover, RA 9904 requires that the
RMC No. 009-2013. properties. association must be composed of members
DOF Opinion Further, to be qualified having ownership or other legal right over
No. 004-2019 as an association under BIR denied the request on the ground residential real property. MACEA’s Articles of
RA No. 9906, the that MACEA does not fall within the Incorporation showed that it was established
association must be definition of "Associations" under RA for owners and/or holders of legal rights of
composed of members 9904; rather, it was an organization of commercial properties located within
having ownership or property owners in the Makati Central MACEA's area.
other legal right over Business District (MCBD), which is
residential real property primarily a commercial district. Further, MACEA is also not qualified to be exempt
over a certain it argued that the LGU having from income tax as a civic organization
jurisdiction. jurisdiction over MACEA did not lack under Section 30 (G) of the Tax Code. To be
the resources to provide the basic tax exempt under Section 30 (G), the civic
services rendered by MACEA to its leagues or organizations must not be
members. It cited MACEA's Audited organized for profit but operated exclusively
Financial Statement for 2012 showing for the promotion of social welfare.
that MACEA received subsidies from
the Barangays for monthly support to
assist on the costs of providing the
basic services.

Request for Emoluments are not a This concerns a request for tax Whether the emoluments No. While earnings or assets of the
Review of BIR violation of the exemption by the General Emilio should be considered a organization should not inure to the benefit
Ruling No. 755- inurement prohibition Aguinaldo Medical School Foundation, violation of the inurement of any of its trustees, organizers, officers,
2018 when the former is Inc. or GEAMSFI. The BIR denied the prohibition members or any specific person, it should
given for the purposes request on the basis that GEAMSI was not also be overlooked that the exigencies of
DOF Opinion of paying reasonable not a non-profit organization as the operations of these organizations also
No. 005-2019 expenses vital to the defined under sec. 30 of the NIRC, require it to incur reasonable expenses. This
exercise of the primarily because of the emoluments is a legitimate expense which arises in the
organization’s of Php 2,000 that the school’s board of performance of their duties and
benevolent purpose. trustee members receive every responsibilities as duly appointed members
meeting. According to the BIR, these of the board. Activities and objectives of
emoluments are a form of private these organizations could not materialize
inurements which the law defining without the members of the board exercising
“non-profit” prohibits. (no net income their function as such. Thus, it would greatly
or asset accrues to or benefits any hamper the progress and success of the
member or specific person, with all the organization in achieving their benevolent
net income or asset devoted to the purpose/s. The emolument of P2,000.00
institution's purposes and all its given to the Trustees for travel expenses
activities conducted not for profit). incurred going to and from the
organization's quarterly meeting is a
reasonable expense incurred in furtherance
of their duties and responsibilities and
ultimately, the objectives of GEAMSFI.

Request forAbsent the essential A total of P 11,999,000 shares of stock Whether UIM is liable for No. The subject transfer of the MCA Shares
Review of BIR requisites of a valid of MCA Music, Inc. (MCA) is registered the payment of Donor’s Tax from UMIH to UIM pursuant to their merger
Ruling No. ITAD donation, a merger of under Universal Music International is not subject to donor's tax since it lacks the
108-2018 two entities for a bona Holding B.V. (UMIH). UMIH and essential requisites for a valid donation. In
fide business purpose Universal Internal Music B.V. (UIM) the case at bar, animus donandi (donative
DOF Opinion cannot be considered as merged, allowing UIM to acquire intent) is wanting in the transfer of the MCA
No. 006-2019 a donation and does UMIH's assets and obligations, Shares from UMIH to UIM. The transfer was
not warrant the including the ownership of the MCA done for a bona fide business purpose which
payment of Donor's Tax. Shares. is to simplify the corporate structure of the
group and to save costs by way of
CIR Dulay then issued BIR Ruling No. integrating the activities, including the net
ITAD 108-18 stating that the transfer of assets, of the merging companies to one
MCA Shares from UMIH to UIM, is entity. Hence, UIM is not liable for Donor’s
subject to documentary stamp tax, and Tax.
donor's tax since such transfer was
without compensation and is
considered a donation. UIM requested
BIR to review its Ruling, arguing that
the merger was based on legitimate
business purpose and that there was no
donative intent which would warrant
the payment of donor's tax.

Request for BIR
International A foreign RP International Resources Pte. Ltd. Whether RPIR is exempt DOF ruled that RPIR is not exempt from
Tax Affairs corporation deploying (RPIR) is a foreign corporation from Philippine taxes under Philippine taxes. It declared that RPIR is
Division Ruling personnel in the organized and existing under the laws Article 7 of the RP-SG Tax considered to have established a permanent
No. ITAD 048-18 Philippines to render of Singapore. It entered into a Treaty establishment in the Philippines through the
services for a period Professional Services Agreement (PSA) personnel it has deployed to API, who are
DOF Opinion more than 183 days is with Amdocs Singapore (ASPL) also a considered RPIR’s personnel, since RPIR
No. 007-2019 considered to have a Singaporean Corporation. herein the possesses the power of control over the
permanent former agreed to provide professional personnel. Moreover, RPIR is considered to
establishment and is a services to the latter and its affiliates, be a resident corporation engaged in trade
resident corporation including Amdocs Philippines or DOF ruled that RPIR is not exempt from
engaged in trade and Incorporated (API). The personnel of Philippine taxes because RPIR is considered
business in the RPIR rendered service in the Philippines to have established a permanent
Philippines. Hence, it is with each deployment lasting for more establishment in the Philippines through the
liable to pay tax than 183 days per expert. RPIR, through personnel it has deployed to API, who are
attributable to the counsel, filed for Tax Treaty Relief considered its personnel, since RPIR
permanent Application (TTRA) with the BIR possesses the power of control over them.
establishment. requesting for confirmation that the Moreover, RPIR is considered to be a
services fees paid by API to RPIR are resident corporation engaged in trade or
exempt from income tax Philippines- business in the Philippines as it has deployed
Singapore Tax Treaty. However, the its personnel for a period of more than 183
TTRA for tax exemption was denied by days implying continuous commercial
the BIR. dealings in the country. Thus, it is liable to
pay income tax attributable to the PE as well
as the value added tax for the services
rendered in the Philippines. However, it was
referred to the BIR for proper adjudication as
to whether the applicable thresholds were
met.

Request forThe Determination of Taishan Insurance Brokers Philippines, Whether the transaction is No, donor’s tax should not be imposed. To
Review of BIR the Fair Market Value of a domestic corporation, filed a Request subject to donor’s tax determine the Fair Market Value of the
Ruling No. ITAD the shares that are not for Review in the BIR Ruling ITAD No. shares not listed and traded in the local
010-18 listed and traded in the 010-19. Taishan filed for an in behalf of stock exchanges to be sold, bartered or
local stock exchanges to JAB Capital, a foreign and a non- exchanged are that which are duly certified
DOF Opinion be sold, bartered or resident corporation where the latter by an independent public account and
No. 008-2019 exchanged are those entered into a Deed of Assignment nearest to the date of sale. In the case at bar,
which are duly certified transferring 480,001 common shares to JAB Capital sold and transferred all its
by an independent JCIP Holdings, a domestic corporation, Taishan Shares to JCIP Holdings on Nov 26,
public account and for a consideration of P94,716,000.00. 2015. The nearest to the date of sale is AFS
nearest to the date of for the year ended Dec 31 2015 rather than
The assailed BIR Ruling held that the
sale. that of the previous year. Thus, in comparing
capital gains derived by JAB Capital
FMV of the stockholder’s equity as of Dec 31
from the sale of the Taishan Shares to
2015 which Php84,606, 933 and the
JCIP Holdings are exempt from capital
consideration of P94,716,000.00, the sale is
gains because of the Philippine-
not subject to donor’s tax because the value
Malaysia Tax Treaty. However, since the
of consideration exceeded the fair market
Fair Market Value of the shares is
value by Php10,109,067.
greater than the consideration
received. The excess between the
higher FMV and the lower
consideration is subject to donor’s tax,
pursuant to Sec 100 of the Tax Code.

Request for Per diem given to FSSI is a non-stock, non-profit Whether FSSI is tax exempt Yes. DOF reverses the BIR Ruling denying
Review of BIR employees in attending corporation duly organized under FSSI’s application for tax exemption. Being a
Ruling No. 624- meetings as part of Philippine law as the recipient of non-stock, non-profit corporation, FSSI is
2018 dated 11 monitoring and proceeds of the Contribution subject to a non-distribution constraint. This
April 2018 evaluation do not Agreement between the Philippines is embodied in the prohibition against
violate the prohibition and Swiss Confederation effecting their inurement in Section 30(E) of NIRC.
DOF Opinion against private bilateral agreement. In its Articles of It is clear from FSSI’s constitutive documents
No. 009-2019 inurement nor is it a Incorporation, FSSI’s primary purpose that no part of their income or asset goes to
form of private is to assist developmental, educations, any specific person as compensation,
inurement. Absent any scientific and/or charitable non- salaries, or honorarium. Further, a careful
allegation that it is governmental/private organizations, reading of FSSI’s financial statements, the
exorbitant, these among others. Thus, FSSI sent a letter per diem given to FSSI’s staff in attending
expenses are to the BIR in 2014 applying for tax BOT meetings do not violate the prohibition
considered reasonable exemption pursuant to Section 30(E) of against private inurement. These are
and necessary for the NIRC. BIR denied this claiming that FSSI considered, in the absence of contrary
furtherance of FSSI’s failed to prove that it is a non-profit allegation, reasonable and necessary
purposes. corporation and that FSSI’s claim that operating expenses in furtherance of the
its income has not inured to the benefit purposes for which FSSI was organized.
of any individual is untrue. Thus, BIR
holds that FSSI is subject to 30%
corporate income tax under Section
27(A) of NIRC.

Request for In Philippine- This is a request for review with regards Whether BIR was correct in No. Under the Philippine-Netherlands treaty,
Review of the Netherlands treaty, to BIR Ruling that since LAIII Medical ruling that LMCC UA did Philippine may tax the dividends paid by a
Bureau of resident of Netherlands City Cooperative U.A. (LMCC UA) is a not qualify for the 10% Philippine company to a resident of
Internal may avail of the 10% cooperative, the capital of which is not preferential tax rate and Netherlands at rate not exceeding (a)10% of
Revenue Ruling preferential tax treaty divided into shares; it does not qualify imposed 15% instead the gross amount of the dividends if the
No. ITAD 003-15 rate provided that the for the 10% preferential tax rate. Thus capital recipient company is divided into
capital of recipient the BIR granted a higher preferential shares and holds directly at least 10% of the
DOF Opinion company is divided into tax rate of 15%. capital of the company paying dividends.
No. 010-2019 shares and holds (b)15% in all other cases. Provided further
directly at least 10% of Professional Services Inc. (PSI) is a that recipient of the dividend must not carry
the capital of the domestic corporation registered under on business in the Philippines.
company paying SEC while LMCC U.A is organized under
dividends. Provided the law of Netherlands. LMCCUA proved to be a resident of
further that recipient of Netherlands and unregistered company
the dividend must not As stated in the certificate, LMCC U.A. under SEC. It complied with the requirement
carry on business in the holds 354,400 shares of common stock that its capital must wholly or partially
Philippines. of PSI representing 17.9% of the total divided into shares. Lastly, it holds 17.9% of
issued and outstanding capital stock of PSI shares.
PSI.
Therefore LMCCUA is entitled of 10%
preferential tax treaty rate.

Request for Yes. LMCC U.A. complied with the
Review of BIR Under the tax treaty, the Professional Services Inc (PSI) is a Whether LMCC U.A. is requirement that the capital must be wholly
Ruling No. ITAD Philippines may tax the domestic corporation engaged in qualified for the 10% or partly divided into shares and is entitled
126-14 dividends paid by a establishing, operating, owning preferential tax rate, and to the 10% preferential tax treaty rate. It
Philippine company to a hospitals and clinics. not the 15% preferential tax maintains a capital account for members
DOF Opinion resident of the rate of the gross amount who are obliged to contribute to the capital.
No. 011-2019 Netherlands at a rate LAIII Medical City Cooperatief U.A. pursuant to Article 10 (2) (b) In return, members are entitled to a
not exceeding 10% of (LMCC U.A.) is an entity organized in of the Philippines- distribution of net proceeds according to the
the gross amount of the the Netherlands engaged in the Netherlands Tax Treaty percentage interest of each member in the
dividends. activities of investing in international capitalization of the cooperative. Units of
market. LMCC U.A. is not registered as participation in cooperatives are considered
To avail of the tax rate, a domestic corporation in the shares of stock under the Tax Code.
the recipient company Philippines nor is it licensed to do
in Netherlands must business in the Philippines. Its shares of LMCC U.A. is a resident of the Netherlands
have capital which is common stock represent 18.23% of the proven by the Authenticated Certificate of
wholly or partly divided total outstanding capital stock of PSI. Residency from Netherlands and the
into shares and holds Certificate of Non-Registration of Company
directly at least 10% of When the Directors of PSI declared
from the SEC. It is also the beneficial owner
the capital of the cash dividends to all stockholders, BIR
of 18.23% of the issued and outstanding
company paying the issued BIR ITAD Ruling No. 126-14
capital stock of PSI, as proven by its
dividends. which imposed a 15% preferential rate
Secretary's Certificate.
instead of 10%, since LMCC U.A. is a
cooperative and the capital of which is
not divided into shares.

Request for
Review of BIR The mere realization of Uytengsu Foundation, Inc. (UFI) is a Whether UFI is a charitable Yes. UFI has operated ‘exclusively’ for
Ruling No. 652- income from non-stock, non-profit corporation duly institution operating charitable purposes even if it has not
2018 investments and organized and existing under the laws exclusively for charitable conducted yearly charity-oriented
dividends does not of the Philippines. UFI applied for tax purposes and thus, entitled projects/activities. As long as no part of its
DOF Opinion automatically divest a exemption revalidation requesting for to a tax exemption profits inure to the benefits of any
No. 012-2019 corporation of its status the issuance of a tax exemption ruling/certificate stockholder or individual. Upon examination
as a non-stock, non- ruling/certificate as a non-stock, non- of the UFI’s financial documents, UPI has
profit corporation profit corporation. The CIR denied UFI’s operated exclusively for charitable purposes
operating exclusively request for failure to meet one of the over the past few years.
for charitable purposes, conditions, the “operational test”, for
as long as no part of its an entity to be considered a charitable Even if UFI’s financial statement for the 3
profits inures to the corporation or association. years show that it has not conducted any
benefit of any charity-oriented projects in pursuit of its
stockholder or According to such ruling, UFI shall be charitable purpose, its regular activities of
individual. considered an ordinary corporation as donating or rendering financial assistance to
it has not operated exclusively for its beneficiaries, albeit not yearly, is an
charitable purposes and has not shown accomplishment of its charitable purposes to
any charity-oriented projects/activities carry out activities for the promotion of the
for the years 2010-2012. welfare of the community and not for
financial gain or profit.
Request for Business involves This is Request for Review for BIR’s Whether IBPAP is engaged IBPAP is not engaged in business. “Business”
Review of BIR engagement in ruling denying the Information in business, thus should be is restricted to activities or affairs where
Ruling No. 026- activities mainly for Technology and Business Process denied exemption profit is the purpose, or livelihood is the
2016 profit. VAT registration Association of the Philippines, Inc. motive. As shown in its Articles of
is not proof of being (IBPAP)’s request for exemption under Incorporation, IBPAP is a national
DOF Opinion engaged in business. Section 30(F) of NIRC, which grants organization which represents the business
No. 013-2019 income tax exemption to business interests of its members, all belonging to the
league, chamber of commerce, or eServices industry. In furtherance of its

board of trade, not organized for profit purpose, it may host activities to raise money
and no part of the net income of which to fund its overhead expenses.
inures to the benefit of any private
stockholder or individual. BIR denied Further, VAT is a tax on transactions which
said exemption on the ground that can be imposed on even a non-profit entity.
IBPAP is engaged in business of The fact that IBPAP is VAT-registered dot not
providing services to its members and necessarily mean that it is engaged in
other entities interested in the business. It can be subject to VAT and still be
eServices industry, as proven by the exempt under Section 30(F) of NIRC.
fact that it is VAT-registered.
Request for Not falling as a SN Power Invest Netherlands B.V. Whether SNPIN is a No. RR 09-04 defines “financial institution”
Review of BIR "financial institution" as ("SNPIN") sent a request for review of financial institution as as financial intermediaries performing quasi-
Ruling No. 242- contemplated by law BIR Ruling No. 242-2019 which prayed contemplated by law and banking functions, and other non-bank
2019 shall not entitle one to for the reversal of BIR's findings that it thus, is entitled to the financial intermediaries including finance
exemption from is not considered within the term requested exemption companies.
DOF Opinion Philippine income tax "foreign government" as contemplated
No. 014-2019 and withholding tax on in Section 32(B)(7)(a)(i) of NIRC. Hence, Section 22(W) & (X) of NIRC and BSP Manual
income received from any income from its investments in the Regulations for Non-Bank Financial
investments in the Philippines in loans, stocks, bonds or Institutions expounds the underlined terms.
Philippines in loans, domestic securities, or interest on its SNPIN has not proven that it performs
stocks, bonds or Philippine bank deposits shall be activities of a "financial intermediary" as its
domestic securities, or subject to Philippine income tax and principal function and on a regular and
interest on its Philippine consequently, to withholding tax. recurring basis. It must be performing quasi-
bank deposits under the banking functions but SNPIN also failed to
NIRC of 1997 BIR declared SNPIN not entitled to the satisfy such requirements among others.
exemption on the ground that:
1. SNPIN is not directly owned, SNPIN's SBI Code classifies its activities as
controlled, or directly enjoying "Financial Holdings". It is more of a holding
refinancing from the Kingdom of company rather than a non-bank financial
Norway. intermediary. A holding company has been

2. SNPIN has not shown that it is a defined by SEC as "a corporation organized
financial institution as contemplated by to hold the stock of another or other
law. corporations".
Request forFor an establishment to Hitachi-Omron Terminal Solutions Whether Hitachi-Omron is No. The BIR made a reversible error.
Review of BIR be classified as a Corporation requested for review of a permanent establishment
Ruling No. ITAD permanent BIR Ruling which found that Hitachi- and thus considered a The Philippines-Japan tax treaty provides:
169-2013 establishment and thus Omron has a permanent establishment resident foreign “...that an enterprise shall be deemed to have
a resident foreign in the Philippines and must be treated corporation a permanent establishment in the first-
DOF Opinion corporation, it must as a resident foreign corporation. mentioned Contracting State in respect of
No. 015-2019 satisfy the requisites any activities which that person undertakes
provided for in the tax It argued that paragraph 5(c), Article 5, for the enterprise, if:
treaty between the of the Philippines-Japan tax treaty does
involved Contracting not apply to the Basic Purchase c) that person maintains in the first-
Parties. Agreement between Hitachi-Omron mentioned Contracting State a stock of
and Hitachi Terminals Philippines. goods or merchandise belonging to the
enterprise from which he regularly fills orders
It maintains that to constitute a on behalf of the enterprise.”
permanent establishment, it must be
shown that Hitachi Terminal Since Hitachi Terminals Philippines, and not
Philippines: Hitachi Omron, is the owner of the stock of
(1) is not an agent of an independent goods or merchandise. Hence, paragraph
status under paragraph 7, Article 5 of 5(c), Article 5, of the Philippines-Japan tax
the tax treaty; treaty does not apply. Thus, Hitachi-Omron

(2) maintains in the Philippines a stock is not a permanent establishment and thus
of goods or merchandise belonging to not considered a resident foreign
Hitachi Omron, and corporation.
(3) regularly fills orders from that stock
of goods on behalf of Hitachi Omron.
Request for
Review of BIR Revenues derived from The Davao Medical School Foundation, Whether income derived by Article XlV, Section 4(3) of the 1987
Certificate of and assets used in the Inc., a non-stock, non-profit DMSFI from its hospital Constitution does not require that revenues
Tax Exemption operations of hospitals educational institution, requested for operations and IPHC and income must have also been sourced
No. 256-2019 are exempt from review of its Bureau of Internal Revenue program are exempt from from educational activities or activities
taxation provided they Certificate of Tax Exemption which income tax and VAT related to the purposes of an educational
DOF Opinion are owned and granted DMSFI's exemption from institution. The phrase all revenues is
No. 016-2019 operated by the income tax on tuition fees and other unqualified by any reference to the source of
educational institution school-related fees and income derived revenues. As long as revenues and income
as an indispensable from operation of cafeterias/canteens, are used actually, directly, and exclusively for
requirement in the dormitories and bookstores located educational purposes, they shall be exempt
operation and within DMSFI's premises so long as the from taxes and duties.
maintenance of its same are actually, directly and
medical exclusively used for educational The IPHC program is part and parcel of
school/college/institute purposes. The Request for Review prays DMSFI's educational and hospital operations
. for the modification of the BIR issued and grants and donations received for said
Certificate of Tax Exemption program form part of DMSFI's revenues that
particularly in regard to the non- may qualify for exemption. Hence, revenues
exemption from income tax and value- derived herein are similarly exempt from
added tax of the revenue derived by income tax and VAT.
DMSFI from its hospital operations and
Institute of Primary Care program,
which was established primarily as a
teaching facility.

Request for The conveyance of land Bureau of Internal Revenue Ruling Whether the transfer of the No. It is exempt. First, the BIR erred when it
Review of BIR and common areas by a No.295-2014 ruled that the transfer land and the common areas ruled that the transfer is not exempt from tax
Ruling No. 296- real estate developer to from China Banking Corporation to of the subject property because it is not similar to the facts under
2014 the condominium lmperial Sky of the land and common from Chinabank to lmperial RMO 18-2009. The RMO does not provide
corporation is made areas in the lmperial Sky Garden Sky is subject to 6% the requirements for tax exemption. lt merely
DOF Opinion without consideration Condominium Project is not covered by creditable withholding tax provides that if the facts of the transfer of
No. 017-2019 and not in connection Revenue Memorandum Order No. 18- property are analogous to the facts in
with a sale therefore no 2009 and, hence, is subject to the 6% previously promulgated BIR rulings, the
taxable income is creditable withholding tax pursuant to requirement of a prior BIR ruling can already
realized and no Revenue Regulations No. 2-t998, as be dispensed with.
creditable withholding amended.
tax is payable and Imperial Sky seek to reverse said BIR Second, any transfer or conveyance of a unit
collectible. Ruling since Chinabank acquired all the in the condominium shall include the
rights and interest over the properties transfer or conveyance of the undivided
pursuant to a foreclosure sale, the interest in the land and the common areas or
subject transfer from Chinabank to the membership or shareholdings in the
lmperial Sky is compliant with the condominium corporation. Thus, the transfer
conditions of RMO No. 18-2009 and, was only made pursuant to RA 4726 and
therefore, exempt from income tax. therefore exempt from tax. The transfer was
also made without consideration.

Request for
Review of BIR Income derived by the Innovatronix, Inc. filed a request for Whether Innovatrix, Inc. is No. The DOF agreed with the BIR Ruling
Ruling No. inventor from the review before the Department of entitled to tax exemption which provides that tax exemption can only
0505-2019 technologies and Finance (DOF) with respect to the BIR under RA 7459 be claimed by the inventor, Engr. Castillo and
invention are exempted Ruling No. 0505-2019 which limited the not by any other entity such as Innovatrix,
DOF Opinion from tax. The purpose is tax exemption under RA 7459 or the Inc. that commercially produces and
No. 018-2019 to provide incentives to Inventors and Inventions Incentives Act distributes the invented product.
inventors and protect of the Philippines to the inventor.
their exclusive right to Section 6 in conjunction with Section 2 of RA
their invention Innovatronix, Inc. claimed that it is 7459 limits the tax exemption privileges to
particularly when it is entitled to tax exemption under RA the original inventor, hence, it should be
beneficial to the people 7459 because (1) the patentee of the construed that only Engr. Castillo, who is the
and contributes to inventions are Engr. Castillo as the inventor, is entitled to tax incentives and
national development inventor and Innovatrix, Inc. and (2) the does not include Innovatrix, Inc since a
and progress law exempts the income on the corporation is a separate and distinct entity
invention from taxes. The request for from that of its stockholders.
review sought for the reversal of the
BIR’s finding. Any income received by Innovatronix, Inc.
from the production, distribution and
marketing is subject to the payment of taxes.
Request for The right to appeal is The BIR issued a ruling denying the tax Whether the appeal will No. DOF DO. No. 007-02 states that upon
Review of BIR not inherent, but is a exemption of KLM Airlines, a Dutch prosper receipt of adverse decision from the CIR, a
ITAD Ruling No. statutory right and thus international airline company, on the taxpayer must file a Request for Review not
019-19 strict compliance with basis of lack of reciprocity. Facts show later than 30 days from date of receipt at the
its procedure is that there are no Philippine airlines Secretary of Finance. This was not complied
DOF Opinion mandatory and operating in Dutch jurisdiction, and with.
No. 001-2020 jurisdictional. thus Philippine carriers cannot “actually
enjoy” tax exemption which, to it, is The perfection of an appeal must be made in
what is required for the principle of the manner and within the period prescribed
reciprocity to be satisfied. KLM Airlines by law. Such procedure is not only

argues that reciprocity does not require mandatory, but also jurisdictional.
“actual enjoyment,” as long as the laws
of each country extend tax exemption
to the international carriers of each
country.
However, it filed a request for review at
the Secretary of Finance outside of the
reglementary period.

EH 405 MASTERLIST | A.Y. 2019 – 2020 | ATTY. KIM M. ARANAS
FAMILY NAME, First Name ROLE
ARCAYOS, Breden Researcher; made case digests
ARCHIVAL, Jezreel Ezer Researcher; made case digests
BAUTISTA, Giovahnn Antone Domini Researcher; made case digests
BUENAVENTURA, Rae Mari Researcher; made case digests; table content layout; cover page layout; editor; proofreader
CABALLES, Ericka Harriet Researcher; made case digests
CARREON, Nicole Marie Researcher; made case digests
CHIO, Kaithleen Researcher; made case digests
DAVID, Karl Justeen Researcher; made case digests
EMILIO, Edward Dominic Researcher; made case digests
GINGOYON, Riczen Researcher; made case digests
HALAPAN, French Ronald Researcher; made case digests
JAVIER, Thea Angela Researcher; made case digests
JORDA, Nidelito Researcher; made case digests
MACARAYA, Krisha Researcher; made case digests
PI ÑOL, Steffi Researcher; made case digests
QUITARA, John Henedee Researcher; made case digests
RESERVA, Hillary Olga Researcher; made case digests
ROMANO, Chrisha Ver Researcher; made case digests
ROQUE, Nica Researcher; made case digests
SALVADOR, Sean Timothy Researcher; made case digests
SERENADO, Alljun Nic Researcher; made case digests
SOLA, Eula Mae Researcher; made case digests
SOLAJES, Janil Researcher; made case digests; proofreader
TAGALOG, Honey Babe Researcher; made case digests; layout per topic; compiled the topics; editor; proofreader
TAN, Alessa Rose Researcher; made case digests
VILLACARLOS, Christian Researcher; made case digests
VILLANUEVA, Justin Researcher; made case digests
YANG, Jandilyn Researcher; made case digests

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1 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

TOPIC ONE – GENERAL PRINCIPLES OF TAXATION (PAGE 7)

2 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

TOPIC TWO – INCOME TAXATION – GENERAL OVERVIEW (PAGE 37)

3 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

TOPIC FOUR – INCOME TAXATION FOR CORPORATIONS (PAGE 60)

4 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

5 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

TOPIC SIX: DEPARTMENT OF FINANCE OPINIONS (PAGE 95)

6 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

CASE TITLE PRINCIPLE SUMMARY OF FACTS ISSUE RULING

8 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

9 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

By the principle of ejusdem generis,

10 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

11 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

Reyes v. Almanzor Taxation should be

12 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

Pepsi Cola Bottling Whether the assailed

13 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

14 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

15 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

16 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

For this reason, when the conditions so

17 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

18 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

19 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

20 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

21 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

CIR v. PAGCOR | GR The Respondent, PAGCOR, has operated

22 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

23 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

24 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

25 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

26 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

City Assessor of The CHHMAC building

27 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

28 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

29 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

Thus, if the university actually, directly

30 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

31 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

(1) Whether the

32 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

33 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

34 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

35 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

36 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

CASE TITLE PRINCIPLE SUMMARY OF FACTS ISSUE RULING

38 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

39 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

40 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

FAI and FDC filed protest.

41 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

42 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

43 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

These services were rendered

44 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

In this case, the petitioner's sales of

45 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

46 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r

47 |EH 405 2020 T a x J u r i s p r u d e n c e B r i e f e r