Mr. Kofee and Ms. Faiste ("K and F") Graduated With A Juris

TAXATION 1 – MIDTERMS
Strictly No Factual and Legal Bases, No credit.

Good luck and God bless.
Name: Egargo, Mamerto Jr. R.
Question QUESTION Point ANSWER Score

No. s
1 Mr. Kofee and Ms. Faiste (“K and F”) graduated with a juris 10 No. RTC has no jurisdiction. It is the CTA has jurisdiction under section 4 of the Tax Code. Hence, RTC
doctor degree. While taking the 2021 bar examinations, they must dismiss the case.
were caught cheating by a Supreme Court bar exam watcher.
After investigation and despite receiving passing grades, the
Supreme Court En Banc invalidated their examinations and
replaced their passing grades with a final grade of “failed”.
Moreover, the Supreme Court En Banc issued a resolution
perpetually disqualifying them from taking future bar
examinations.
Due to said unfortunate event, K and F ventured instead into

business, changed their cheating ways, got married and
eventually established a modest milk tea brand.
In the year 2019, the BIR issued Revenue Memorandum Order

(“RMO”) No. 10-2019, imposing additional tax reporting
burdens on milk tea shop owners. K and F instructed their
former classmate and in-house counsel, Atty. Honesto, to
contest the validity of RMO No. 10-2019. Initially, a petition or
appeal was filed with the Secretary of Finance (“SOF”) to
declare the said RMO invalid. The SOF denied the appeal.
Within 30 days from receipt of the SOF’s decision, K and F,
through Atty. Honesto, filed an appeal with the Regional Trial
Court (“RTC”) citing the following as jurisdictional basis: (1)
No. s
That under the CTA law, Republic Act No. 1125, as amended,
the CTA has jurisdiction on decisions of the SOF only in customs
law cases. Thus, it is the RTC, the court of general jurisdiction,
which has jurisdiction over this case and not the CTA; and, (2)
In CIR vs. CTA and Petron Corporation, GR No. 207843 dated
July 15, 2015, the Supreme Court through Justice Perlas-
Bernabe said: “while the above statute confers on the CTA
jurisdiction to resolve tax disputes in general, this does not
include cases where the constitutionality of a law or rule is
challenged. Where what is assailed is the validity or
constitutionality of a law, or a rule or regulation issued by the
administrative agency in the performance of its quasi-
legislative function, the regular courts have jurisdiction to pass
upon the same. xxx.”
Does the RTC have jurisdiction over K and F’s appeal? Fully
discuss the correctness of the jurisdictional basis cited above.
2 In 2008, the BIR issued a ruling stating that Mudhoney Baking 10

School (“MBS”) is exempt from the payment of Documentary
Stamp Tax (“DST”) on diplomas. In 2012, the Assistant
Commissioner issued an assessment against MBS for deficiency
DST covering the year 2010 amounting to P1,450.00 inclusive of
surcharge of P250.00 and interest of P200.00. Due to the
minimal amount involved, the Company immediately paid the
said assessment. Thereafter, MBS’ students substantially
increased which resulted to higher income and tuition fees.
In 2014, the Commissioner issued an assessment against MBS

for deficiency DST on diplomas amounting to P1,450,000.00
No. s
inclusive of surcharge of P250,000.00 and interest of
P200,000.00 covering the year 2013. MBS filed a protest
arguing that the assessment is invalid under the non-
retroactivity of rulings rule. On the other, the BIR argues that
the ruling issued to MBS has already been revoked in the year
2012 in view of the assessment issued by the BIR.
Who is correct?
3 Senator Manee sponsored a bill entitled: “a law imposing 5% 10

tax on honoraria received by persons delivering lectures and
other similar matters on religion.” Senator Manee consults you
as to whether the said bill violates the provisions of the
Constitution relative to infringement of religious freedom. He
fears that the if the bill becomes a law, it might be declared
unconstitutional on the basis of the American Bible Society
case decided by the Supreme Court
What will your reply be?
4 Noodle Philippines, Inc., (“NPI”), a domestic corporation, 10

entered into a royalty and franchising agreement with Ichiran
of Japan (“IOJ”), a corporation organized and existing under
the laws of Japan, in connection with the operation of a chain
of restaurants in the Philippines by NPI under the brand name
“Ichiran Ramen.” NPI withheld and remitted 30% Final
Withholding Tax to the BIR on its royalty payments to IOJ using
the Tax Code rate.
Subsequently, NPI, on behalf of IOJ, filed a claim for refund

No. s
with the BIR alleging that it over withheld and overpaid Final
Withholding Tax on royalties by paying 30% instead of the 10%
tax treaty rate under the RP-Japan Tax Treaty. Thereafter, the
BIR denied the claim for refund reasoning that IOJ failed to
submit the required CORTT Form under RMO No. 8-2017 which
effectively disqualified it from availing of the lower tax treaty
rate.
Was the denial of the claim for refund correct?
5a) Under Republic Act (“RA”) No. 123456, Lannister Plantito 5

Corporation (“Lannister”) is exempt from all taxes, national and
local. Lannister is engaged in the business of maintaining a
greenhouse. The City of Las Pinas passed an ordinance
imposing “Plant Inspection Fees” on plants stored in
greenhouses located within the City of Las Pinas. The Plant
Inspection Fees imposed amounts to P10,000.00 per annum.
a) Lannister invokes its exemption from payment of Plant

Inspection Fees pursuant to RA No. 123456. Is Lannister
correct?
5b) b) Will your answer be the same if the ordinance provides for a 5
Plant Inspection Fee amounting to P1,000.00 per plant?
6 Magpapasok Corporation (“Magpapasok”) sold its machineries 10

considered as real property and paid 6% Capital Gains Tax
(“CGT”) amounting to P1,000,000.00. Realizing that it paid the
incorrect tax on the transaction, it filed a claim for refund with
the BIR. Eventually the case reached the CTA. The CTA denied
No. s
the claim for refund on the ground that while it is true that
Magpapasok incorrectly paid CGT, it is instead liable to pay
30% Regular Corporate Income Tax (“RCIT”) on the transaction
amounting to P1,500,000.00. Thus, the company is not entitled
to any refund and is even liable to pay deficiency tax
amounting to P500,000.00, which the BIR should look into.
Magpapasok appealed to the Supreme Court alleging that the

CTA’s decision was incorrect because it violates the rule that
taxes are not subject to set-off when it denied its claim for
refund by setting-off its erroneous payment of CGT and its
alleged liability for RCIT. Magpapasok further argues that the
proper procedure in handling the circumstances of its case
would be for the CTA to grant the refund of the CGT in the
amount of P1,000,000.00 and for the BIR to make a separate
assessment for RCIT in the amount of P1,500,000.00.
Rule on the appeal of Magpapasok particularly its argument

that the rule on “taxes are not subject to set-off” was violated.
7 President Digong signed into law RA No. 234567 entitled: “a 10

law imposing a 20% indirect tax on the sale of soft drinks and
junk foods.” Sec. 1 of the law provides that the purpose of the
law is raise revenues to be used to increase the salaries of
policemen. The validity of the said law is challenged on the
following grounds:
a) Indirect taxes are regressive. Hence, violative

of the Constitution since the same only allows a
progressive system of taxation; and,
No. s
b) A year after its effectivity, the amount of tax
collected pursuant to said law was eighty (80%)
short of its collection goal. Thus, the policemen
did not get their salary increases.
Rule on the validity of RA No. 234567 considering the grounds

raised.
8 Briefly explain the following doctrines: lifeblood doctrine; 5

necessity theory; benefits received principle; and, doctrine of
symbiotic relationship.
9 Enumerate all the requisites of prohibited double taxation. 5
10 Briefly explain tax evasion and tax avoidance. 2
11 Enumerate the three (3) elements or factors to be considered 3

in determining if tax evasion exists.
12 What is international juridical double taxation? 3
13 How is a claim of exemption from the imposition of taxes 2

construed? Is there any exception?
14 Enumerate five (5) constitutional limitations on the power to 5

tax.
15 Enumerate the three (3) exceptions to the non-retroactivity of 3

rulings rule.
No. s

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TAXATION 1 – MIDTERMS

Strictly No Factual and Legal Bases, No credit.

Question QUESTION Point ANSWER Score

Due to said unfortunate event, K and F ventured instead into

In the year 2019, the BIR issued Revenue Memorandum Order

2 In 2008, the BIR issued a ruling stating that Mudhoney Baking 10

In 2014, the Commissioner issued an assessment against MBS

3 Senator Manee sponsored a bill entitled: “a law imposing 5% 10

What will your reply be?

4 Noodle Philippines, Inc., (“NPI”), a domestic corporation, 10

Subsequently, NPI, on behalf of IOJ, filed a claim for refund

Was the denial of the claim for refund correct?

5a) Under Republic Act (“RA”) No. 123456, Lannister Plantito 5

a) Lannister invokes its exemption from payment of Plant

6 Magpapasok Corporation (“Magpapasok”) sold its machineries 10

Magpapasok appealed to the Supreme Court alleging that the

Rule on the appeal of Magpapasok particularly its argument

7 President Digong signed into law RA No. 234567 entitled: “a 10

a) Indirect taxes are regressive. Hence, violative

Rule on the validity of RA No. 234567 considering the grounds

8 Briefly explain the following doctrines: lifeblood doctrine; 5

9 Enumerate all the requisites of prohibited double taxation. 5

10 Briefly explain tax evasion and tax avoidance. 2

11 Enumerate the three (3) elements or factors to be considered 3

12 What is international juridical double taxation? 3

13 How is a claim of exemption from the imposition of taxes 2

14 Enumerate five (5) constitutional limitations on the power to 5

15 Enumerate the three (3) exceptions to the non-retroactivity of 3

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