DIGESTED CASES

TAXATION

#6

Camp John Hay Development Corp. vs. Central Board of Assessment Appeals
GR No. 169234 (706 SCRA 547),

FACTS

This is a Petition for Review on Certiorari seeking to reverse and set aside the Decision of the Court of Tax Appeals
(CTA) En Banc, which affirmed the Resolutions issued by the Central Board of Assessment Appeals (CBAA)
remanding the case to the Local Board of Assessment Appeals (LBAA) of Baguio City for further proceedings.

Camp John Hay Development Corporation (CJHDC) received notices of assessment for real property taxes from the
City Assessor of Baguio City, covering the various buildings and two (2) parcels of land owned by the Bases
Conversion and Development Authority (BCDA) in the John Hay Special Economic Zone (JHSEZ), Baguio City,
which were leased to CJHDC. CJHDC questioned the assessments for lack of legal basis and claimed that it was
exempted from paying taxes, including real property taxes, under the Bases Conversion and Development Act of
1992.

ISSUE

Whether the requirement of payment under protest applies to tax-exempt entities?

RULING

The Court finds the petition unmeritorious and therefore rules against petitioner.

Section 252 of RA No. 7160, also known as the LGC of 1991,14 categorically provides:

SEC. 252.Payment under Protest. (a) No protest shall be entertained unless the taxpayer first pays the tax. There
shall be annotated on the tax receipts the words "paid under protest." The protest in writing must be filed within thirty
(30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the case of a municipality
within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from receipt.

Section 252 directs that the taxpayer/real property owner questioning the assessment should first pay the tax due
before his protest can be entertained. As a matter of fact, the words "paid under protest" shall be annotated on the
tax receipts. Consequently, only after such payment has been made by the taxpayer may he file a protest in writing
(within thirty 30 days from said payment of tax) to the provincial, city, or municipal treasurer, who shall decide the
protest within sixty (60) days from its receipt. In no case is the local treasurer obliged to entertain the protest unless
the tax due has been paid.

It is an accepted principle in taxation that taxes are paid by the person obliged to declare the same for taxation
purposes. As discussed above, the duty to declare the true value of real property for taxation purposes is imposed
upon the owner, or administrator, or their duly authorized representatives. They are thus considered the taxpayers.
Hence, when these persons fail or refuse to make a declaration of the true value of their real property within the
prescribed period, the provincial or city assessor shall declare the property in the name of the defaulting owner and
assess the property for taxation. In this wise, the taxpayer assumes the character of a defaulting owner, or defaulting
administrator, or defaulting authorized representative, liable to pay back taxes. For that reason, since petitioner
herein is the declared owner of the subject buildings being assessed for real property tax, it is therefore presumed to
be the person with the obligation to shoulder the burden of paying the subject tax in the present case; and
accordingly, in questioning the reasonableness or correctness of the assessment of real property tax, petitioner is
mandated by law to comply with the requirement of payment under protest of the tax assessed, particularly Section
252 of RA No. 7160 or the LGC of 1991. The restriction upon the power of courts to impeach tax assessment without
a prior payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the
nation and as such their collection cannot be curtailed by injunction or any like action otherwise, the state or, in this
case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery
gravely disabled.

#7

1st Lepanto Taisho Insurance Corp. vs. Commissioner of Internal Revenue

G.R. No. 197117 (695 SCRA 639),

FACTS

This is a petition for review on certiorari filed by First Lepanto Taisho Corporation, now FLT Prime Insurance
Corporation (petitioner), assailing the Decision and Resolution of the Court of Tax Appeals (CTA) En Banc, which
affirmed Decision of the CTA-Second Division.

Petitioner is a non-life insurance corporation and considered as a "Large Taxpayer under”. After submitting its
corporate income tax return for taxable year ending December 31, 1997, petitioner received a Letter of Authority,
dated October 30, 1998, from respondent Commissioner of Internal Revenue (CIR) to allow it to examine their books
of account and other accounting records for 1997 and other unverified prior years. On December 29, 1999, CIR
issued internal revenue tax assessments for deficiency income, withholding, expanded withholding, final withholding,
value-added, and documentary stamp taxes for taxable year 1997. The petitioner protested the tax assessments and
filed a motion for partial withdrawal of the petition for review in view of the tax amnesty program. An amount of
P1,994,390.86 reduced tax liability was ordered after the CTA 2 nd Division partially granted the petition. However, its
Motion for Partial Reconsideration was denied by the CTA Second Division, which was affirmed by the CTA En Banc,
hence this petition.

ISSUE:

Whether or not the CTA En Banc erred in holding the petitioner liable for various tax assessments and delinquency
interest?

RULING

The Court finds that a director is considered an employee for taxation purposes under Section 5 of Revenue
Regulation No. 12-86. The non-inclusion of the directors' names in the company's Alpha List does not automatically
mean they are not employees. The imposition of withholding tax on compensation depends on the nature of work
performed by the directors.

The Court agrees with the CTA En Banc's findings that the petitioner failed to sufficiently establish certain expenses
and commissions to be exempt from withholding tax. The Court also agrees with the CIR that the petitioner did not
provide proof of remittance to Matsui Marine & Fire Insurance Co. Ltd. Also, the imposition of delinquency interest
under Section 249 (c) (3) of the 1997 NIRC is justified because the petitioner failed to pay the deficiency tax within
the prescribed time.

The Court denies the petition and affirms the decision and resolution of the CTA En Banc.

#8
San Roque Power Corp. vs. Commissioner of Internal Revenue
G.R. No. 180345, Nov. 25, 2009

FACTS

This is a Petition for Review on Certiorari, assailing the Decision of the Court of Tax Appeals (CTA) En Banc
affirming the Decision of the CTA Second Division, which dismissed the claim of petitioner for the refund and/or
issuance of a tax credit certificate in the amount of Two Hundred Forty-Nine Million Three Hundred Ninety-Seven
Thousand Six Hundred Twenty Pesos and 18/100 (P249,397,620.18) allegedly representing unutilized input Value
Added Tax (VAT) for the period covering January to December 2002.

Petitioner, San Roque Power Corporation is a domestic corporation organized under the corporate laws of the
Republic of the Philippines. On October 11, 1997, San Roque entered into a Power Purchase Agreement (PPA) with
the National Power Corporation (NPC) by building the San Roque Multi- Purpose Project in San Manuel,
Pangasinan. The San Roque Multi-Purpose Project allegedly incurred, excess input VAT in the amount of
P559,709,337.54 for taxable year 2001 which it declared in its Quarterly VAT Returns filed for the same year. San
Roque duly filed with the BIR separate claims for refund, amounting to P559,709,337.54, representing unutilized
input taxes as declared in its VAT returns for taxable year 2001. However, on March 28, 2003, San Roque filed
amended Quarterly VAT Returns for the year 2001 since it increased its unutilized input VAT to the amount of
P560,200,283.14. San Roque filed with the BIR on the same date, separate amended claims for refund in the
aggregate amount of P560,200,283.14. On April 10, 2003, a mere 13 days after it filed its amended administrative
claim with the CIR on March 28, 2003, San Roque filed a Petition for Review with the CTA. CIR alleged that the claim
by San Roque was prematurely filed with the CTA.

ISSUE

Whether or not San Roque is entitled to tax refund?

RULING

The Court finds that the petitioner is entitled to a refund or tax credit under Section 112 (A) of the NIRC for their zero-
rated sale of electricity to the National Power Corporation (NPC).It noted that the transaction between the petitioner
and NPC, although not a commercial sale, is deemed a sale under the law.The Court also finds that the petitioner
has complied with the requirements for a refund or tax credit, including being VAT registered, having paid input taxes,
and not having applied the input taxes against output taxes.

The Court reverses the decision of the CTA En Banc and orders the Commissioner of Internal Revenue to refund or
issue a tax credit certificate to the petitioner in the amount of P246,131,610.40.

#9

Commissioner of Internal Revenue vs. Bank of the Philippine Islands

G.R. No. 134062, Apr 17, 2007
FACTS

This is a petition for review on certiorari of a decision of the Court of Appeals (CA) dated which reversed and set
aside the decision and resolution of the Court of Tax Appeals (CTA).

The case involves a dispute between the Commissioner of Internal Revenue (CIR) and the Bank of the Philippine
Islands (BPI) over tax assessments. In October 1988, the CIR assessed BPI's deficiency percentage and
documentary stamp taxes for the year 1986, amounting to a total of P129,488,656.63. BPI received two notices of
assessment, which did not provide the legal and factual bases for the assessments. In December 1988, BPI replied
to the CIR's assessment, requesting clarification and explanation of the deficiencies.

In May 1991, the CIR sent a letter to BPI explaining the basis of the assessments. BPI requested reconsideration,
which was denied in December 1991. BPI then filed a petition for review in the Court of Tax Appeals (CTA), which
dismissed the case for lack of jurisdiction. The Court of Appeals (CA) reversed the CTA's decision and remanded the
case to the CTA for a decision on the merits.

The CIR appealed to the Supreme Court.

ISSUE

Whether or not the assessments issued to BPI for deficiency percentage and documentary stamp taxes for 1986 had
already become final and unappealable? Whether or not BPI was liable for the said taxes?

RULING

The Supreme Court ruled in favor of the CIR. The Court held that the October 28, 1988 notices were valid
assessments and that BPI failed to protest within the prescribed period. Therefore, the assessments became final
and unappealable. BPI's failure to protest the assessments meant that it was liable for the assessed taxes.

#10

Commissioner of Internal Revenue vs. Pineda

G.R. No. L-22734, Sep 15, 1967

FACTS

Manuel B. Pineda is held individually responsible for the unpaid income tax of his deceased father's estate. Atanasio
Pineda, Manuel's father, died on May 23, 1945, leaving behind his wife, Felicisima Bagtas, and 15 children, with
Manuel being the eldest. Estate proceedings were conducted in the Court of First Instance of Manila, and the estate
was divided among the heirs, with Manuel receiving a share of approximately P2,500.00
After the estate proceedings were closed, the Bureau of Internal Revenue discovered that the income tax returns for
the years 1945, 1946, 1947, and 1948 were not filed. It then issued an assessment for the unpaid taxes, including
surcharges and interest, amounting to P2,707.44.

Manuel contested the assessment and appealed to the Court of Tax Appeals, arguing that he should only be liable
for the taxes corresponding to his share as an heir.

ISSUE
Whether Manuel B. Pineda should be held liable for the full amount of the unpaid taxes of his deceased father's
estate or only for the taxes corresponding to his share as an heir?

RULING:

The Court based its decision on the principle that an heir is liable for the assessment against the estate as an heir
and as a holder-transferee of property belonging to the estate. The liability of an heir is proportionate to the share
received from the inheritance, but it cannot exceed the amount of the share. The Government has the right to collect
the tax from the property in the possession of the heir, as it has a lien on the property for unpaid income taxes. The
Government can choose to collect the taxes by going after all the heirs and collecting from each one proportionately
or by using the lien to collect from the property of a specific heir.

The Supreme Court ordered Manuel B. Pineda to pay the assessed taxes and affirmed the Government's right to
collect the tax from the property in his possession.

#11

Misael P. Vera, et.al., vs Hon. Jose F. Fernandez, et. al

G.R. No. L-31364 March 30, 1979 (89 SCRA 199)

FACTS

This is an appeal on certiorari from two orders of the Court of First Instance of Negros Occidental, Branch V, entitled:
"Intestate Estate of Luis D. Tongoy," first dismissing the Motion for Allowance of Claim and for an Order of Payment
of Taxes by the Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for
deficiency income taxes for the years 1963 and 1964 of the decedent in the total amount of P3,254.80, inclusive 5%
surcharge, 1% monthly interest and compromise penalties, and the second, denying the Motion for reconsideration
of the Order of dismissal.

The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in
the total sum of P3,254.80. The Administrator opposed the motion solely on the ground that the claim was barred
under Section 5, Rule 86 of the Rules of Court. Finding the opposition well-founded, the respondent Judge, Jose F.
Fernandez, dismissed the motion for allowance of claim filed by herein petitioner, Regional Director of the Bureau of
Internal Revenue. A motion for reconsideration was filed, but was also denied, hence this petition.

ISSUE

Whether or not the statute of non-claims, specifically Section 5, Rule 86 of the Rules of Court, bars the government's
claim for unpaid taxes that are still within the period of limitation prescribed in the National Internal Revenue Code?

RULING

Section 5, Rule 86 of Rules of Court, as invoked by the respondent, makes no mention of claims for monetary
obligations of the decedent created by law, such as taxes which is entirely of different character from the claims
expressly enumerated therein, such as: "all claims for money against the decedent arising from contract, express or
implied, whether the same be due, not due or contingent, all claims for funeral expenses and expenses for the last
sickness of the decedent and judgment for money against the decedent." Under the rule of statutory construction, the
mention of one thing implies the exclusion of another thing not mentioned. Thus, if a statute enumerates the things
upon which it is to operate, everything else must necessarily, and by implication be excluded from its operation and
effect. The reason for the more liberal treatment of claims for taxes against a decedent's estate is grounded on the
principle that taxes are the lifeblood of the Government and their prompt and certain availability are imperious need.
Citing the last paragraph of Section 315 of the Tax Code payment of income tax shall be a lien in favor of the
Government of the Philippines from the time the assessment was made by the Commissioner of Internal Revenue
until paid with interests, penalties, etc. By virtue of such lien, this Court held that the property of the estate already in
the hands of an heir or transferee may be subject to the payment of the tax due the estate.

In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of
Taxes) which, though filed after the expiration of the time previously limited but before an order of the distribution is
entered, should have been granted by the respondent court, in the absence of any valid ground, as none was shown,
justifying denial of the motion, specially considering that it was for allowance of claim for taxes due from the estate,
which in effect represents a claim of the people at large.

The order appealed from is therefore reversed.

#12

Commissioner of Internal Revenue vs. Court of Appeals

G.R. No. 125355. March 30, 2000 (234 SCRA 348)

FACTS

The case involves the liability of Commonwealth Management and Services Corporation (COMASERCO) for value-
added tax (VAT) on services rendered to Philamlife and its affiliates.

COMASERCO is a corporation affiliated with Philamlife and was organized to provide collection, consultative, and
other technical services to Philamlife and its affiliates.The Bureau of Internal Revenue (BIR) issued an assessment to
COMASERCO for deficiency VAT for taxable year 1988. COMASERCO filed a petition for review with the Court of
Tax Appeals, contesting the assessment and arguing that they were not engaged in business and therefore not liable
to pay VAT.The Court of Tax Appeals ruled in favor of the Commissioner of Internal Revenue, but the Court of
Appeals later reversed this decision, hence this petition.

ISSUE

Whether or not COMASERCO was engaged in the sale of services and thus liable to pay VAT?

RULING

The services rendered by COMASERCO to Philamlife and its affiliates are subject to VAT. COMASERCO is liable to
pay VAT on the services rendered. Even non-profit organizations are liable to pay VAT on the sale of goods or
services.
Republic Act No. 7716 clarifies that non-stock, non-profit organizations or government entities are subject to VAT.
BIR Ruling emphasizes that as long as an entity provides services for a fee, remuneration, or consideration, the
service rendered is subject to VAT. The performance of services for a fee, remuneration, or consideration is
considered a sale of services subject to VAT.

Court GRANTS the petition and REVERSES the decision of the Court of Appeals

#13

Commissioner of Internal Revenue vs. Algue, Inc.

G.R. No. L-28896, Feb 17, 1988

FACTS
Algue, Inc. claimed a deduction as legitimate business expenses in its income tax returns. On January 14, 1965,
Algue received a letter from the Commissioner of Internal Revenue assessing it for delinquency income taxes for the
years 1958 and 1959. On January 18, 1965, Algue filed a letter of protest or request for reconsideration. On March
12, 1965, a warrant of distraint and levy was presented to Algue, but it was refused due to the pending protest. The
protest could not be located in the office of the Commissioner of Internal Revenue, but it was later found and
considered after Algue provided a copy.

On April 7, 1965, Algue was informed that the protest was impliedly rejected, and the warrant was finally served. On
April 23, 1965, Algue filed a petition for review with the Court of Tax Appeals. The Court of Tax Appeals had seen it
differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for
actual services rendered. The payment was in the form of promotional fees. These were collected by the payees for
their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase
of the properties of the Philippine Sugar Estate Development Company, hence this petition.

ISSUE

Whether or not the Commissioner of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by
Algue as legitimate business expenses in its income tax returns and whether or not the appeal of Algue from the
decision of the Commissioner of Internal Revenue was made on time and in accordance with law?

RULING

The appeal of Algue was filed on time because the protest filed by Algue suspended the reglementary period for filing
an appeal. The P75,000.00 deduction claimed by Algue was legitimate because it was necessary and reasonable
based on the efforts exerted by the payees.

The court emphasized the importance of reconciling the interests of the authorities and the taxpayers in order to
achieve the real purpose of taxation, which is the promotion of the common good.It also cited provisions of the Tax
Code and Revenue Regulations to support its ruling.

The burden of proof was on the taxpayer to prove the validity of the claimed deduction, and in this case, Algue was
able to satisfactorily discharge this burden.