Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales Gonzales TCC, LGC and Remedies under the Tax Code of 1997 DIGESTS FOR TARIFFS AND CUSTOMS CODE (Cua and Muli) Chia v Collector 177 SCRA 755 Facts: Facts: Electr Electroni onic c and electr electrica icall equip equipme ment nt and others articles found in 2 stores (Tom’s Electronics and Sony Merchandizing) were seized by the Anti Smuggling Center by virtue of the warrant issued by the Collector of Customs. Items seized were allegedly illegally imported into the Philippines by foreign foreign ships ships in transit transit through through Philippines Philippines soil without passing through the Bureau of Customs, thereby evading corresponding custom duties and taxes. Petitioner Chia seeks to nullify the warrants issued.
Issue Issue:: W/N seizur seizure e is justif justified ied by the warran warrants ts issued by the Collector of Customs? Yes Held/ Held/Doc Doctri trine: ne: The petiti petition on is devoi devoid d of merit merit because not only may goods be seized without a search and seizure warrant under Section 2536 of the Customs and Tariff Code, when such goods are openly offered for sale or kept in storage in a sto store as in this his case ase, but but the the fact fact is that that petitioner's stores — Tom's Electronics" and "Sony Merch Merchand andisi ising ng (Phil (Phil.)" .)" — were were search searched ed upon upon
warrants of search and detention issued by the Collector of Customs, who, under the Constitution, was "a responsible officer authorized by law" to issu issue e them them.. Sect Sectio ions ns 2208 2208 of the the Tari Tariff ff and and Customs Code provide: SEC. SEC. 2208. 2208. RIGHT RIGHT OF POLICE POLICE OFFICER OFFICER TO ENTER ENTER INCLOSURE — For the more effective discharge of his offici official al duties duties,, any person person exerci exercisin sing g the powers powers here herein in conf confer erre red, d, may may at any any time time enter enter,, pass pass thro throug ugh h or sear search ch any any land land or incl inclos osur ure e or any any wareho warehouse use,, store store or other other buildi building, ng, not being being a dwelling house.
A warehouse, store or other building or inclosure used for the keeping or storage of articles does not become a dwelling house within the meaning hereof merely by reason of the fact that a person employed as watchman lives in the place, nor will the fact that his family stays there with him alter the case. Lastly, upon effecting the seizure of the goods, Bureau of Customs acquired jurisdiction not only over the case but also over the goods seized for the purpose of enforcing the tariff and customs taxes. taxes. A part dissatisfi dissatisfied ed by the decisio decision n of the Collec Collector tor may appeal appeal to the Commis Commissio sioner ner of Customs, whose decision is appealable to the CTA
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales Gonzales TCC, LGC and Remedies under the Tax Code of 1997 then to the SC. Since petitioner did not exhaust all administrative remedies, his recourse to this court is premature.
Viduya v. Berdiago 73 SCRA 553 Facts: Facts: The searc search h warran warrantt issue issued d by petiti petitione onerr Viduya who was the former Collector of Customs is quashed by the lower court upon motion by privat private e respon responden dentt Berdia Berdiago go.. The The warran warrantt of seizure and detention was issued on the basis of reliable reliable intellig intelligence ence that fraudulen fraudulentt document documents s were were used used by Berdi Berdiago ago in secur securing ing the release release from the Bureau of Customs of a Rolls Royce, it being made to appear that such car was a 1961 model instead of a 1966, thus enabling respondent to pay lower custom duties. There was a dema demand nd for for the the corr correc ectt amou amount nt due due and and Respon Responden dentt expre expresse ssed d his willin willingn gness ess to pay. pay. Unfortunately, he was not able to live up to his promise so a search warrant was issued, pursuant to Sect Sectio ion n 2099 2099 of the the TCC TCC whic which h requ requir ires es a searc search h warra warrant nt if such such goods goods are located located in a dwelling house because the car was located in the
Yabut Compound. Morever, it was not shown that Berdiago did not own the dwelling house which was was searc searche hed. d. Noneth Nonethele eless, ss, respo responde ndent nt judge judge quashed the warrant. Issue: W/N there was grave abuse of discretion on the the part part of the the judg judge e in quas quashi hing ng the the sear search ch warrant? Yes Held/ Held/Rat Ratio: io: Petit Petition ion is grante granted. d. As the car was was kept kept in a dwell dwelling ing house house in Wakas, Wakas, Barrio Barrio San Dionisio, Parañaque, Rizal, petitioner through two of his his offi office cers rs in the the Cust Custom oms s Poli Police ce Serv Servic ice e applie applied d for and was was able able to obtain obtain the searc search h warrant. Had there been no such move on the part of petitioner, the duties expressly enjoined on him by law namely to assess and collect all lawful revenues, to prevent and suppress smuggling and other frauds, and to enforce tariff and customs law would not have been performed.
LLamado v. Collector of Customs 122 SCRA 118 Facts: A Cessna plane containing de gaza lamps was was un unloa loade ded d at the Alabat Alabat airstr airstrip. ip. Later Later that that night, night, that, that, a motori motorized zed boat boat carryi carrying ng Fortun Fortune e
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales Gonzales TCC, LGC and Remedies under the Tax Code of 1997 then to the SC. Since petitioner did not exhaust all administrative remedies, his recourse to this court is premature.
Viduya v. Berdiago 73 SCRA 553 Facts: Facts: The searc search h warran warrantt issue issued d by petiti petitione onerr Viduya who was the former Collector of Customs is quashed by the lower court upon motion by privat private e respon responden dentt Berdia Berdiago go.. The The warran warrantt of seizure and detention was issued on the basis of reliable reliable intellig intelligence ence that fraudulen fraudulentt document documents s were were used used by Berdi Berdiago ago in secur securing ing the release release from the Bureau of Customs of a Rolls Royce, it being made to appear that such car was a 1961 model instead of a 1966, thus enabling respondent to pay lower custom duties. There was a dema demand nd for for the the corr correc ectt amou amount nt due due and and Respon Responden dentt expre expresse ssed d his willin willingn gness ess to pay. pay. Unfortunately, he was not able to live up to his promise so a search warrant was issued, pursuant to Sect Sectio ion n 2099 2099 of the the TCC TCC whic which h requ requir ires es a searc search h warra warrant nt if such such goods goods are located located in a dwelling house because the car was located in the
Yabut Compound. Morever, it was not shown that Berdiago did not own the dwelling house which was was searc searche hed. d. Noneth Nonethele eless, ss, respo responde ndent nt judge judge quashed the warrant. Issue: W/N there was grave abuse of discretion on the the part part of the the judg judge e in quas quashi hing ng the the sear search ch warrant? Yes Held/ Held/Rat Ratio: io: Petit Petition ion is grante granted. d. As the car was was kept kept in a dwell dwelling ing house house in Wakas, Wakas, Barrio Barrio San Dionisio, Parañaque, Rizal, petitioner through two of his his offi office cers rs in the the Cust Custom oms s Poli Police ce Serv Servic ice e applie applied d for and was was able able to obtain obtain the searc search h warrant. Had there been no such move on the part of petitioner, the duties expressly enjoined on him by law namely to assess and collect all lawful revenues, to prevent and suppress smuggling and other frauds, and to enforce tariff and customs law would not have been performed.
LLamado v. Collector of Customs 122 SCRA 118 Facts: A Cessna plane containing de gaza lamps was was un unloa loade ded d at the Alabat Alabat airstr airstrip. ip. Later Later that that night, night, that, that, a motori motorized zed boat boat carryi carrying ng Fortun Fortune e
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Blue Seal Cigarettes unloaded the goods and was later loaded in a DC-3 plane. The DC-3 plane took off using the de gaza lamps as a guide to safety take take off from the airst airstrip rip.. A few days days after, after, a warrant was issued for seizure and detention of the the Cess Cessna na Plan Plane. e. Peti Petiti tion oner ers s argu argue e that that the the Cessna was not used to transport the contraband goods but only bring the de gaza lamps.
1. The Province of Bulacan v CA & Republic Cement Corp G.R. No. 126232. November 27, 1998 DOCTRINE: A province has no authority to impose the taxes on gravel, sand, stones, earth and other quarry resources extracted from private lands. A province may not levy excise taxes on articles already taxed by the NIRC
Issu Issue: e: W/N W/N the the Cess Cessna na plan plane e was was used used in the the un unla lawf wful ul impo import rtat atio ion n of ciga cigagr grte tes s with within in the the mean meanin ing g of Sect Sectio ion n 2530 2530 of the the TCC TCC whic which h provides that
(by (by Gran Gran)) Fact Facts: s: In 1992 1992,, the the Sangguniang Bulacan passed Provincial Panlalawigan of Ordinance No. 3, Sec 21 of which provides:
Held/Ratio: Petition Dismissed. It is not necessary that that the vessel vessel or aircra aircraft ft mist mist itself itself carry the cont contra raba band nd.. Ther There e is noth nothin ing g in the the law law that that requires. In the case at bar, it is undeniable that the Cessna plane was deliberately used to ensure the DC-3 plane take off without peril and transport the goods to Pampanga.
LOCAL GOVERNMENT TAXATION Doctri Doctrines nes are from from ANGEL ANGEL NOTES, NOTES, Digests Digests from our classmates
Sec 21. There There is hereby levied levied & collected a tax of 10% of the FMV in the locality per cubic meter of ordinary stones, sand, gravel, gravel, earth & other quarry quarry resources, resources, such, but not limited to marble, granite, volcanic cinders, basalt, tuff and rock phosphate, extracted from public lands or from beds of seas, lakes, rivers, streams, creeks and other public waters within its territorial jurisdiction.
In a letter letter dated Nov. 11, 1993, 1993, the Provinc Provincial ial Treasurer assessed Republic Cement Corp (RCC) P2,524,6 P2,524,692 92 for extractin extracting g limestone limestone,, shale and silica from several parcels of private private land in the province during in 1992 & 1993. On Dec. Dec. 23, 1993, 1993, RCC formally formally contes contested ted the assessment, which was, denied by the Provincial Treasurer on Jan. 17, 1994. Thus, on Feb. 14, 1994, 1994, RCC filed a petition petition for declarato declaratory ry relief relief with the RTC of Bulacan.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales Gonzales TCC, LGC and Remedies under the Tax Code of 1997 The RTC, upon motion of the province, dismissed RCC’s petition on the ground that the declaratory relief was improper, allegedly because a breach of the ordinance had been committed by RCC. On July 11, 1994, RCC filed a petition for certiorari with with the SC which which,, in a resolu resolutio tion, n, referred the same to the CA. In the interim, the Provinc Province e issue issued d a warran warrantt of levy against against RCC for its unpaid unpaid tax liabilities. liabilities. In an agree agreeme ment nt and and modus between the modus vivendi vivendi between parties, RCC agreed to pay under protest 50% of the tax assessed, in exchange for the lifting of the warrant of levy. Also, the parties agreed, agreed, with the approval of the CA, to limit the issue for to the question question as to WON the provincia provinciall governme government nt coul could d impo impose se and/ and/or or asse assess ss taxe taxes s on quar quarry ry reso resou urce rces extra xtrac cted ted by RCC fro from priva rivate te lands. lands. The CA ruled in favor of RCC, hence this petition for certiorari. Issues & Rulings: 1)WON the remedy against the RTC’s dismissal of the petition of RCC is certiorari. The remedy against a final order [motion to dismi ismiss ss]] is an app appeal, al, and and not not a pet petitio ition n for certiorari un unde derr Rule Rule 65 rega regard rdle less ss of the the questions sought to be raised on appeal, whether of fact or of law, whether involving jurisdiction or grave abuse of discretion of the trial court. The part party y aggr aggrie ieve ved d does does not not have have the the opti option on to substitute the special civil action for certiorari un unde derr Rule Rule 65 for for the the reme remedy dy of appeal. The existence existence and availability of the the right
of appeal are antitheti antithetical cal to the availment availment of the special civil action for certiorari. However, contrary to the allegation of petitioners, RCC did not file a petition for certiorari under Rule 65, but an appeal by certiorari un unde derr Rule Rule 45. Even law students know that certiorari under Rule 45 is a mode of appeal. 2) WON the province of Bulacan, on the basis of the ordinance, has authority to impose taxes on quarry resources extracted from private lands. NO. Alth Altho ough ugh Sec 186 186 of the the LGC LGC allo allow ws a province to levy taxe axes other than those specifically enumerated in the LGC, the same is subj subjec ectt to cert certai ain n cond condit itio ions ns.. On One e of thes these e limi limita tati tion ons s is Sec Sec 133( 133(h) h) of the the LGC LGC whic which h provid provides es that that a provin province ce may not levy excis excise e taxes on articles already taxed by the NIRC. Under Sec Sec 151 151 of the the NIRC NIRC,, an exci excise se tax tax is levi levied ed on all quarr quarry y reso resour urce ces, s, rega regard rdle less ss of orig origin in,, whether extracted from public or private land. In this this case case,, sinc since e the the tax tax impo impose sed d by the the Province is an excise tax (being a tax upon the perf perfor orma manc nce, e, carr carryi ying ng on, on, or exer exerci cise se of an activity), it may not ordinarily impose taxes on ston stones es,, sand sand,, grav gravel el,, eart earth h and and othe otherr quarr quarry y resources, as the same are already taxed under the NIRC. Howe However ver,, as to sand, sand, grave gravel, l, earth earth and other other quarry quarry resource resources s extracte extracted d from public lands, lands, a province may do so because Sec 138 of the LGC
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 expressly empowers a province to impose taxes thereon. Moreover, even if the limitation set by Section 133 of the LGC is disregarded, petitioners may not impose taxes on quarry resources extracted from private lands on the basis of Sec 21 of Provincial Ordinance No. 3 as the latter clearly applies only to quarry resources extracted from public lands. 2. First Phil Industrial Corp v. CA G.R. No. 125948. December 29, 1998 DOCTRINE: The local government has no authority to impose another tax on the common carriers as the same is already taxed under the Local Government Code To tax the same again would defeat the purpose of the Code (by Gran) Facts: FPIC is a grantee of a pipeline concession to contract, install and operate oil pipelines. Sometime in Jan 1995, it applied for a mayor's permit with the Office of the Mayor of Batangas City. However, before it could be issued, the respondent City Treasurer required it to pay a contractor’s business tax on its gross receipts for FY1993 pursuant to Sec 143(e) of the LGC. FPIC paid the tax under protest and on January 20, 1994, it filed a letter-protest addressed to the City Treasurer. On March 8, 1994, the protest was
denied on the ground that since FPIC is not considered engaged in transportation business, it cannot claim exemption under Sec 133(j) of the LGC as said exemption applies only to common carriers transporting goods & passengers through moving vehicles or vessels either by land, sea or water. On June 15, 1994, FPIC filed with the RTC of Batangas City a complaint for tax refund with prayer for a writ of preliminary injunction against the City of Batangas and the City Treasurer. On October 3, 1994, the trial court rendered a decision dismissing the complaint. FPIC assailed the decision of the lower court via a petition for review to the SC, which referred the case to the CA. The CA affirmed the trial court's ruling and denied FPIC’s motion for reconsideration hence, this petition. Issue: WON FPIC is a common carrier or a transportation contractor and thus not liable for paying the local business tax. YES. Under the following laws, PFIC is considered a common carrier: a. Art 1732 of the Civil Code defines a Common Carrier as "any person, corporation, firm or association engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public."
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Thus, the test for determining whether a party is a common carrier of goods is: 1. must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation; 2. He must undertake to carry goods of the kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and 4. The transportation must be for hire. PFIC is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to employ its services, and transports the goods by land and for compensation. The fact that petitioner has a limited clientele does not exclude it from the definition of a common carrier. Also, the Civil Code makes no distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the transportation of the passengers or goods should be by motor vehicle. In fact, in the US, oil pipe line operators are considered common carriers.
b. Petroleum Act of the Phils also considers FPIC a common carrier and that such petroleum operation is a public utility. c. The BIR in BIR RULING 69-83 likewise said that since PFIC is a pipeline concessionaire that is engaged only in transporting petroleum products, it is considered a common carrier under Republic Act No. 387. As FPIC is a common carrier, it is therefore, exempt from the business tax as provided for in Sec 133 (j) of the LGC. It is clear that the legislative intent in excluding from the taxing power of the LGU the imposition of business tax against common carriers is to prevent a duplication of the so-called common carrier's tax already imposed under the NIRC. FPIC is already paying 3% common carrier's tax on its gross sales/earnings under the NIRC. To tax it again on its gross receipts in its transportation of petroleum business would defeat the purpose of the LGC. 3. Mactan cebu vs. marcos, et. al. G.R. 120082 SEPT. 11, 1996
4. LTO VS. CITY OF BUTUAN G.R. 131512 JAN. 20, 2000 DOCTRINE: Registration and licensing functions are vested in the LTO while franchising and regulatory responsibilities has been vested in the LTFRB.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 LGUS have the power to regulate the operation of tricycles‐for‐hire and to grant franchises for the operation thereof The power is however subject to the guidelines prescribed by the Department of Transportation and Communications 5. City govt. of san pablo vs. reyes G.R. 127708 MARCH 25, 1999 DOCTRINE: The tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons are withdrawn upon the effectivity of the LGC except with respect to those entities expressly enumerated 6. Meralco vs. province of laguna GR. NO. 131359 MAY 5, 1999 DOCTRINE: Local government units have the inherent power to tax except to the extent that such power might be delegated to them either by basic law or by statute 7. Reyes vs. CA G.R. 118233 DEC. 10, 1999 DOCTRINE: The law requires that the dissatisfied taxpayer who questions the validity of the tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period of
also 30 days is allowed for the aggrieved party to go the court. But if the Secretary doesn't decide, after the lapse of 60 days, a party could already proceed to seek relief in court. (by Dela Cruz) Facts: The Sangguniang Bayan of San Juan implemented several tax ordinances on printing and publication, on the sale or transfer of real property, for social housing, imposed new rates of business tax and an annual Ad valorem tax on real property. These ordinances were alleged to be unconstitutional by petitioners because they were promulgated without previous public hearing thereby constituting deprivation of property without due process of law. The appeal was dismissed for being filed out of time or more than 30 days after the effectivity of the ordinances. Their petition having been denied, they filed with the Court of Appeals a petition for certiorari and prohibition which affirmed the Secretary of Justice.
ISSUES: a. Whether or not the CA erred in affirming the decision of the Secretary of Justice who dismissed the prohibition suit, on the ground that it was filed out of time? b. Whether or not the lack of mandatory public hearings prior to the enactment of the ordinances render them void on the grounds of deprivation of property without due process?
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 RULING: a. The law clearly requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary of Justice decides the appeal, a period of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to court to seek relief. These 3 separate periods are given for compliance as a prerequisite before seeking redress in court. For this reason, the courts construe these provisions as mandatory. b. In accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality should be upheld in the absence of evidences showing that procedure prescribed by law was not observed in their enactment. In this case, petitioners have not proved that the Sangguniang Bayan of San Juan failed to conduct the required public hearings before enacting said ordinances REAL PROPERTY TAX (Digests here are taken from ANGEL NOTES) 1. Mactan cebu vs. marcos, et. al. G.R. 120082 SEPT. 11, 1996
FACTS: The MCIAA was created under a special law and was granted exemption from taxes that may be imposed by the national government or any of its instrumentalities. However, the local government of Cebu assessed it for realty tax for parcels of land. It contested this and since the local government wanted to issue a warrant of levy, it sought declaratory relief. HELD: Thus, reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133 the taxing powers of local government units cannot extend to the levy of inter alia, "taxes, fees, and charges of any kind of the National Government, its agencies and instrumentalties, and local government units"; however, pursuant to Section 232, provinces, cities, municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has been granted, for consideration or otherwise, to a taxable person", as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including government‐owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except upon the effectivity of the LGC,
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non stock and non‐profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234, which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are concerned by limiting the retention only to those enumerated there‐in; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real property is owned by the Republic of the Philippines, or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real property taxes granted to natural or juridical persons, including government‐owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if
the petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Section 232 and 234. 2. Napocor vs. province of Lanao G.R. 96700 NOV. 19, 1996 NAPOCOR was the owner of real properties comprising its hydroelectric power plant complex. It was assessed by the local government for payment of realty taxes. Letters of demand were sent up to the extent of scheduling an auction sale. Petitioner filed for a restraining order and was granted. HELD: The exemption is not only legally defensible, but also logically unassailable. The properties in question comprise the site of the entire Agus II Hydroelectric Power Plant Complex, which generates and supplies relatively cheap electricity to the island of Mindanao. These are government properties, wholly owned by petitioner and devoted directly and solely for public service and utilized in the implementation of the state policy of bringing about the total electrification of the country at the least cost to the public, through the development of power from all sources to meet the needs of industrial development and rural electrification. It can be noted, from RA 6395, PD 380 and PD 938, that petitioner's non‐profit
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 character has been maintained throughout its existence, and that petitioner is mandated to devote all its returns from capital investment and excess revenues from operations to its expansion. On account thereof, and to enable petitioner to pay its indebtedness and obligations and in furtherance of the state policy on electrification and power generation, petitioner has always been exempted from taxes. Consequently, the assessment and levy on (as well as the sale of) the properties of petitioner by respondents were null and void for having been in made in violation of Section 10 of P.D. 938 and Section 40 (a) of the Real Property Tax Code. At this juncture, we hasten to point out that the foregoing ruling is solely with respect to the purported realty tax liabilities of petitioner for the period from June 14, 1984 to December 31, 1989. 3. Raul Sesbreno vs. CBAA G.R. 106588 MAR. 24, 1997 FACTS: Sesbreno bought real property to which it constructed a residential property. He duly registered the same for taxation purposes and declared therein he owned a residential house made of strong materials. However, the field inspectors found otherwise—what he constructed was a 5 ‐storey building made of materials. As such, they increased by 1000% the assessment
made on the property, to which petitioner naturally contested. HELD: The cited provision merely defines "market value." It does not in any way direct that the market value as defined therein should be used as basis in determining the value of a property for purposes of real property taxation. On the other hand, Section 5 of PD 464 provides unequivocally that "(a)ll real property, whether taxable or exempt, shall be appraised at the current and fair market value prevailing in the locality where the property is situated." Contrary to petitioner's contention, acquisition cost cannot be and is not the sole basis of the current and fair market value of a property. The current value of like properties and their actual or potential uses, among others, are also considered. 4. Antonio Callanta vs. Ombudsman G.R. 115253‐74 JAN 30, 1998 May officials and employees of the Office of the City Assessor reduce the new assessed values of real properties upon requests of the affected property owners? To forestall the practice of initially setting unreasonably high reassessment values only to eventually change them to unreasonably lower values upon "requests" of property owners, the law gives no such authority to the city assessor or his subalterns. Seemingly innocuous occasions for mischief and veiled opportunities for graft should be excised from the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 public system. Built‐in checks should be zealously observed so that the ingenious and shrewd cannot circumvent them and the audacious cannot violate them with impunity. FACTS: It is alleged that a‐general revision of assessment was conducted by the Office of the City Assessor in 1988 and sometime thereafter. Notices of assessment together with the new tax declarations were subsequently sent to the property owners. Thereafter, respondents, without the authority of the Local Board of Assessment Appeals, reassessed the values of certain properties, in contravention of Sec. 30 of P.D. 464. The said assessment resulted in the reduction of assessed values of the properties. In several similarly worded letter‐complaints dated December 19, 1991, the City of Cebu simultaneously filed criminal and administrative charges against the above-enumerated officers and staff of the City Assessor's Office for "violations of Section 106 of the Real Property Tax Code[,] for gross negligence or willful underassessment of real properties within the city's taxing jurisdiction and for violation of Sec. 3 (e) of R.A. 3019, otherwise known as the Anti ‐ Graft and Corrupt Practices Act[,] for the act of causing undue injury to the City Government by giving private persons unwarranted benefits, advantages or preferences in the discharge of their official and administrative functions through
manifest partiality, evident bad faith or gross inexcusable negligence by reassessing the real properties of taxpayers without any authority whatsoever, thereby resulting in the reduction of tax assessments to the prejudice of the city government HELD: Petitioners anchor the validity of their acts upon the absence of a specific provision of law expressly prohibiting the assessor from making adjustments or corrections in the assessment of real properties, and upon the long‐standing practice of the city assessor's office in making such adjustments/corrections believed in good faith to be sanctioned under Sec. 22, PD 464. This is bereft of any merit. Under the procedure, the issuance of a notice of assessment by the local assessor shall be his last action on a particular assessment. On the side of the property owner, it is this last action which gives him [the] right to appeal to the Local Board of Assessment Appeals. The above procedure also, does not grant the property owner the remedy of filing a motion for reconsideration before the local assessor. The act of herein petitioners in providing the corresponding notices of assessment the chance for the property owners concerned to file a motion for reconsideration and for acting on the motions filed is not in accordance with law and in excess of
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 their authority and therefore constitutes ultra vires acts. 5. BELEN FIGUERRAS VS. CA G.R. 119172 MAR. 25, 1999 Petitioner was the owner of a parcel of land. She received an assessment from the municipal assessor by virtue of two ordinances issued by the SB—one fixing fair market values and another issuing the assessment levels corresponding to each. This prompted the petitioner to file for prohibition but this was overruled by the CA. HELD: Petitioner is right in contending that public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. R.A. No. 7160 provides that an ordinance levying taxes, fees, or charges "shall not be enacted without any prior public hearing conducted for the purpose." However, it is noteworthy that apart from her bare assertions, petitioner Figuerres has not presented any evidence to show that no public hearings were conducted prior to the enactment of the ordinances in question. On the other hand, the Municipality of Mandaluyong claims that public hearings were indeed conducted before the subject ordinances were adopted, although it likewise failed to submit any evidence to establish this allegation. However, in accordance with the presumption of validity in favor of an ordinance, their constitutionality or legality should be upheld
in the absence of evidence showing that the procedure prescribed by law was not observed in their enactment. In view of 188 and 511(a) of R.A. No. 7160, an ordinance fixing the assessment levels applicable to the different classes of real property in a local government unit and imposing penal sanctions for violations thereof (such as Ordinance No. 125) should be published in full for three (3) consecutive days in a newspaper of local circulation, where available, within ten (10) days of its approval, and posted in at least two (2) prominent places in the provincial capitol, city, municipal, or barangay hall for a minimum of three (3) consecutive weeks. Apart from her allegations, petitioner has not presented any evidence to show that the subject ordinances were nor disseminated in accordance with these provisions of R.A. No. 7160. On the other hand, the Municipality of Mandaluyong presented a certificate, dated November 12, 1993, of Williard S. Wong, Sanggunian Secretary of the Municipality of Mandaluyong that "Ordinance No. 125, S‐1993 . . . has been posted in accordance with 59(b) of R.A. No. 7160, otherwise known as the Local Government Code of 1991." 6. TY VS. TRAMPE G.R. NO. 117577, DEC. 1, 1995. FACTS: Petitioners were assessed by the municipal assessor for realty taxes over their real properties.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 They asked for reconsideration and thinking this is not yet enough, they filed a petition for prohibition in the RTC. HELD: Coming down to specifics, Sec. 9 of P.D. 921 requires that the schedule of values of real properties in the Metropolitan Manila area shall be prepared jointly by the city assessors in the districts created therein: while Sec. 212 of R.A. 7160 states that the schedule shall be prepared "by the provincial, city and municipal assessors of the municipalities within the Metropolitan Manila Area for the different classes of real property situated in their respective local government units for enactment by ordinance of the sanggunian concerned. . . ." It is obvious that harmony in these provisions is not only possible, but in fact desirable, necessary and consistent with the legislative intent and policy. By reading together and harmonizing these two provisions, we arrive at the following steps in the preparation of the said schedule, as follows: 1. The assessor in each municipality or city in the Metropolitan Manila area shall prepare his/her proposed schedule of values, in accordance with Sec. 212, R.A. 7160. 2. Then, the Local Treasury and Assessment District shall meet, per Sec. 9, P.D. 921. In the instant case, that district shall be composed of the assessors in Quezon City, Pasig, Marikina, Mandaluyong and San Juan, pursuant to Sec. 1 of
said P.D. In this meeting, the different assessors shall compare their individual assessments, discuss and thereafter jointly agree and produce a schedule of values for their district, taking into account the preamble of said P.D. that they should evolve "a progressive revenue raising program that will not unduly burden the taxpayers" 3. The schedule jointly agreed upon by the assessors shall then be published in a newspaper of general circulation and submitted to the sanggunian concerned for enactment by ordinance, per Sec. 212, R.A. 7160. Although as a rule, administrative remedies must first be exhausted before resort to judicial action can prosper, there is a well‐settled exception in cases where the controversy does not involve questions of fact but only of law. In the present case the parties, even during the proceedings in the lower court on 11 April 1994, already agreed "that the issues in the petition are legal", and thus, no evidence was presented in said court. In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec. 229 (b) that "(t)he proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts . . . ." It follows that appeals to this Board may be fruitful only where questions of fact are involved. Again, the protest contemplated under Sec. 252 of R.A. 7160 is needed where there is a question as to the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 reasonableness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase.
HELD: (1) The equal‐protection guarantee does not require territorial uniformity of laws. (2) The fundamental right of equal protection of the law is not absolute, but is subject to reasonable classification. (3) Classification, to be valid, must (1) rest on substantial distinctions, (2) be germane to the purpose of the law, (3) not be limited to existing conditions only, and (4) apply equally to all members of the same class. (4) Furthermore, RA 7227 clearly vests in the President the authority to delineate the metes and bounds of the SSEZ.
REVISION OF THE JURISDICTION OF THE CTA 1. TIU VS. COURT OF APPEALS G.R. 127410 JANUARY 20, 1999 FACTS: The Congress passed into law RA 7227 entitled “An Act Accelerating the Conversion of Military Reservations Into Other Productive Uses, Creating the Bases Conversion and Development Authority for this Purpose, Providing Funds Therefore and for Other Purposes”, creating the Subic Special Economic Zone (SSEZ). SSEZ has multiple benefits such as (1) free flow or movement of goods and capital; (2) tax and duty‐free importations of raw materials, capital and equipment; (3) no exchange control policy; (4) banking and finance shall be liberalized.
2. PHILIPPINE MATCH CO VS. CITY OF CEBU L‐30745 JAN. 18 1978 WHERE THE SALE WAS BOOKED FACTS: Ordinance No. 279 of Cebu City (approved by the mayor on March 10, 1960 and also approved by the provincial board) is "an ordinance imposing a quarterly tax on gross sales or receipts of merchants, dealers, importers and manufacturers of any commodity doing business" in Cebu City. It imposes a sales tax of one percent (1%) on the gross sales, receipts or value of commodities sold, bartered, exchanged or manufactured in the city in excess of P2,000 a quarter. Section 9 of the ordinance provides that, for purposes of the tax, "all deliveries of goods or commodities stored in
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 the City of Cebu, or if not stored are sold" in that city, "shall be considered as sales" in the city and shall be taxable. Thus, it would seem that under the tax ordinance sales of matches consummated outside of the city are taxable as long as the matches sold are taken from the company's stock stored in Cebu City. The Philippine Match Co., Ltd., whose principal office is in Manila, is engaged in the manufacture of matches. Its factory is located at Punta, Sta. Ana, Manila. It ships cases or cartons of matches from Manila to its branch office in Cebu City for storage, sale and distribution within the territories and districts under its Cebu branch or the whole Visayas‐Mindanao region. Cebu City itself is just one of the eleven districts under the company's Cebu City branch office. Philippine Match sought the refund of a portion of the sales tax collected from them by virtue of a part of it was assessed based on sales which transpired outside of the city and that some of the matches were just stored in the city and delivered directly to customers outside of Cebu. This was denied by the City Treasurer, prompting Philippine Match to file a case in court. The trial court invalidated the tax on transfers of matches to salesmen assigned to different agencies outside of the city and on shipments of matches to provincial customers pursuant to the instructions of the newsmen It ordered the defendants to refund to the plaintiff the sum of P8,923.55 as taxes paid out the said
out‐of‐town deliveries with legal rate of interest from the respective dates of payment. The trial court characterized the tax on the other two transactions as a "storage tax" and not a sales tax. It assumed that the sales were consummated outside of the city and, hence, beyond the city's taxing power. The city did not appeal from that decision. The company appealed from that portion of the decision upholding the tax on sales of matches to customers outside of the city but which sales were booked and paid for in Cebu City, and also from the dismissal of its claim for damages against the city treasurer. HELD: We hold that the appeal is devoid of merit bemuse the city can validly tax the sales of matches to customers outside of the city as long as the orders were booked and paid for in the company's branch office in the city. Those matches can be regarded as sold in the city, as contemplated in the ordinance, because the matches were delivered to the carrier in Cebu City. Generally, delivery to the carrier is delivery to the buyer. A different interpretation would defeat the tax ordinance in question or encourage tax evasion through the simple expedient of arranging for the delivery of the matches at the out. skirts of the city through the purchase were effected and paid for in the company's branch office in the city.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 The taxing power of cities, municipalities and municipal districts may be used (1) "upon any person engaged in any occupation or business, or exercising any privilege" therein; (2) for services rendered by those political subdivisions or rendered in connection with any business, profession or occupation being conducted therein, and (3) to levy, for public purposes, just and uniform taxes, licenses or fees.
Applying that jurisdictional test to the instant case, it is at once obvious that sales of matches to customers outside oil Cebu City, which sales were booked and paid for in the company's branch office in the city, are subject to the city's taxing power. The sales in the instant case were in the city and the matches sold were stored in the city. The fact that the matches were delivered to customers, whose places of business were outside of the city, would not place those sales beyond the city's taxing power. Those sales formed part of the merchandising business being assigned on by the company in the city. In essence, they are the same as sales of matches fully consummated in the city. 3. ILOILO BOTTLERS INC. VS. CITY OF ILOILO G.R. NO. 52019 AUG 19, 1988
FACTS: Plaintiff was an operator of a bottling plant in Pavia, Iloilo. In the meanwhile, city government of
Iloilo enacted an ordinance ordering the payment of municipal tax by bottling, manufacturing and distributing plants, regardless of destination of deliveries. Plaintiff purchased a bottling plant in Iloilo City but subsequently closed the same and moved all to its original plant. Thereafter, the city government assessed it for municipal taxes. HELD: The tax ordinance imposes a tax on persons, firms, and corporations engaged in the business of: 1. distribution of soft‐drinks 2. manufacture of soft‐drinks, and 3. bottling of softdrinks within the territorial jurisdiction of the City of Iloilo. There is no question that after it transferred its plant to Pavia, Iloilo province, Iloilo Bottlers, Inc. no longer manufactured/bottled its softdrinks within Iloilo City. Thus, it cannot be taxed as one falling under the second or the third type of business. The resolution of this case therefore hinges on whether the company may be considered engaged in the distribution of softdrinks in Iloilo City, even after it had transferred its bottling plant to Pavia, so as to be within the purview of the ordinance. Iloilo Bottlers, Inc. disclaims liability on two grounds: First, it contends that since it is not engaged in the independent business of distributing soft‐drinks but that its activity of
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 selling is merely an incident to, or is a necessary consequence of its main or principal business of bottling, then it is NOT liable under the city tax ordinance Second, it claims that only manufacturers or bottlers having their plants inside the territorial jurisdiction of the city are covered by the ordinance. The second ground is manifestly devoid of merit. It is clear from the ordinance that three types of activities are covered: (1) distribution, (2) manufacture and (3) bottling of softdrinks. A person engaged in any or all of these activities is subject to the tax. The first ground, however, merits serious consideration. This Court has always recognized that the right to manufacture implies the right to sell/distribute the manufactured products. Hence, for tax purposes, a manufacturer does not necessarily become engaged in the separate business of selling simply because it sells the products it manufactures. In certain cases, however, a manufacturer may also be considered as engaged in the separate business of selling its products. To determine whether an entity engaged in the principal business of manufacturing, is likewise engaged in the separate business of selling, its marketing system or sales operations must be looked into. This Court had occasion to distinguish two marketing systems: Under the first system, the manufacturer enters into sales transactions and
invoices the sales at its main office where purchase orders are received and approved before delivery orders are sent to the company's warehouses, where in turn actual deliveries are made. No warehouse sales are made; nor are separate stores maintained where products may be sold independently from the main office. The warehouses only serve as storage sites and delivery points of the products earlier sold at the main office. Under the second system, sale transactions are entered into and perfected at stores or warehouses maintained by the company. Anyone who desires to purchase the product may go to the store or warehouse and there purchase the merchandise. The stores and warehouses serve as selling centers. Entities operating under the first system are NOT considered engaged in the separate business of selling or dealing in their products, independent of their manufacturing business. Entities operating under the second system a re considered engaged in the separate business of selling. In the case at bar, the company distributed its softdrinks by means of a fleet of delivery trucks which went directly to customers in the different places in lloilo province. Sales transactions with customers were entered into and sales were perfected and consummated by route salesmen. Truck sales were made independently of transactions in the main office. The delivery trucks were not used solely for the purpose of delivering
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 softdrinks previously sold at Pavia. They served as selling units. They were what were called, until recently, "rolling stores". The delivery trucks were therefore much the same as the stores and warehouses under the second marketing system. Iloilo Bottlers, Inc. thus falls under the second category above. That is, the corporation was engaged in the separate business of selling or distributing soft‐drinks, independently of its business of bottling them. The tax imposed under Ordinance No. 5 is an excise tax. It is a tax on the privilege of distributing, manufacturing or bottling softdrinks. Being an excise tax, it can be levied by the taxing authority only when the acts, privileges or businesses are done or performed within the jurisdiction of said authority. 4. DRILON VS. LIM G.R. NO. 112497 AUG 4, 1994
FACTS: Question on the constitutionality of Section 187 which empowers the Secretary of Justice regarding constitutionality or legality of tax ordinances. In his resolution, Secretary Drilon declared that there were no written notices of public hearings on the proposed Manila Revenue Code that were sent to interested parties as required by Art. 276(b) of the Implementing Rules of the Local Government Code nor were copies of the proposed ordinance published in three
successive issues of a newspaper of general circulation pursuant to Art. 276(a). No minutes were submitted to show that the obligatory public hearings had been held. Neither were copies of the measure as approved posted in prominent places in the city in accordance with Sec. 511(a) of the Local Government Code. Finally, the Manila Revenue Code was not translated into Pilipino or Tagalog and disseminated among the people for their information and guidance, conformably to Sec. 59(b) of the Code. Judge Palattao found otherwise. He declared that all the procedural requirements had been observed in the enactment of the Manila Revenue Code and that the City of Manila had not been able to prove such compliance before the Secretary only because he had given it only five days within which to gather and present to him all the evidence (consisting of 25 exhibits) later submitted to the trial court. HELD: Section 187 authorizes the Secretary of Justice to review only the constitutionality or legality of the tax ordinance and, if warranted, to revoke it on either or both of these grounds. When he alters or modifies or sets aside a tax ordinance, he is not also permitted to substitute his own judgment for the judgment of the local government that enacted the measure. Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his own version of what the Code should be. He did not pronounce the ordinance unwise or unreasonable as a basis for its
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 annulment. He did not say that in his judgment it was a bad law. What he found only was that it was illegal. All he did in reviewing the said measure was determine if the petitioners were performing their functions in accordance with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant of powers to the city government under the Local Government Code. As we see it, that was an act not of control but of mere supervision. An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his discretion, order the act undone or re ‐done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not observed, he may order the work done or re‐done but only to conform to the prescribed rules. He may not prescribe his own manner for the doing of the act. He has no judgment on this matter except to see to it that the rules are followed. In the opinion of the Court, Secretary Drilon did precisely this, and no more nor less than this, and so performed an act not of control but of mere supervision. The issue of non‐compliance with the prescribed procedure in the enactment of the Manila Revenue Code is another matter. The procedural requirements have indeed been observed. Notices of the public hearings were sent to interested
M‐1, M‐2, and M‐3. Exhibits B and C show that the proposed ordinances were published in the Balita and the Manila Standard on April 21 and 25, 1993, respectively, and the approved ordinance was published in the July 3, 4 5, 1993 issues of the Manila Standard and in the July 6, 1993 issue of Balita, as shown by Exhibits Q, Q‐1, Q‐2, and Q‐3. The only exceptions are the posting of the ordinance as approved but this omission does not affect its validity, considering that its publication in three successive issues of a newspaper of general circulation will satisfy due process. It has also not been shown that the text of the ordinance has been translated and disseminated, but this requirement applies to the approval of local development plans and public investment programs of the local government unit and not to tax ordinances.
TAX REMEDIES UNDER THE TAX CODE Tax Delinquency v Tax Deficiency CIR V Island Garment- Siron The respondent corporation filed its appeal seasonably, i.e. within the 30-day period prescribed under R.A. No. 1125, the Act which created the CTA. Respondent corporation’s letter, contesting petitioner’s use of “mathematical computation,”
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 amounted to a motion for reconsideration which interrupted the running of the 30-day period for appeal. It’s a valid request for reconsideration of petitioner’s letter since it raises new and valid issues. A request for reconsideration of the decision of respondent is pro forma if it merely reiterates the ground already stated in the first request for cancellation or withdrawal of the assessment. Here, the request is not merely pro forma as it did not merely reiterate the grounds stated in its first request for cancellation of the assessments but also called attention to those facts or arguments which have been disregarded in the disputed decision of petitioner. Assessment Process Phil Journalist v CIR – Siron The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and collection of internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation. Unreasonable investigation refers to where the period of assessment extends indefinitely since this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation after the expiration of the reasonable period of time. RMC No. 20-90 implements these provisions of the NIRC, and must be strictly followed, such that in its execution, the phrase “but not after ___19__” should be filled up, indicating the expiry date of
the period agreed upon to assess/collect the tax after the regular three-year period of prescription. It must also be signed by the Commissioner or the Revenue District Officer, as the case may be. The waiver is not a unilateral act by the taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain. Oceanic Wireless network v CIR – Siron A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer.
Here, the letter of demand, unquestionably constitutes the final action taken by the BIR on petitioner’s request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. Failure to do so would result in the “issuance of a warrant of distraint and levy to enforce its collection without further notice.” In addition, the letter contained a notation indicating that petitioner’s request for reconsideration had been denied for lack of supporting documents. As to whether it has become final despite the fact that it was only issued and signed by the chief of a division of the BIR, the general rule is that the CIR may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank,
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 subject only to the four (4) exceptions mentioned in the NIRC, as amended. The act of issuance of the demand letter by the Chief of the Accounts Receivable and Billing Division does not fall under any of the exceptions that have been mentioned as non-delegable. Mirant Navotas Corp v CIR – Siron Section 112(A) of the Tax Code provides that any VAT-registered person, whose sales are zero-rated or effectively zero-rated, may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. It is clear that the two-year period within which the refund may be applied should be reckoned from the close of the taxable quarter when the relevant sales pertaining to the input VAT were made, not from the date the tax was paid. Claims filed beyond this period will be disallowed.
CIR v Enron Subic Power Corp. - Fajardo PNZ Marketing v Com * - Fajardo Artex dev Co. v NLRC *- Fajardo CIR v Global Communication -Alciso Oceanic Wireless Network v Comm - Alciso Collector v Batangas Transportation Co.Alciso
Lascona Realty Corp v IMPORTANT CASE
Comm.
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Alciso
Tax Remedies A. Remedies of the Government 1. Collection of Tax Liability Republic v Lim Tian Teng – Francisco The tax payer’s contention that the final decision of the Collector of Internal Revenue on the disputed assessment is a condition precedent to the filing of an action in the CFI for the collection of taxes must fail. Nowhere in the Tax Code is the CIR required to decide with finality a disputed assessment/request for reinvestigation before the CIR can file an action for the collection of tax liabilities. RA 1125 allows the taxpayer to question the correctness of an assessment in both administrative and judicial levels at the same time; thus, the law does not restrict the CIR from collecting the tax liability through any of the means provided in the Tax Code. Arches v Bellosillo *- Francisco In assailing the action brought by the BIR for the collection of tax liabilities, petitioner claims that the approval of the Revenue Commissioner is jurisdictional, and the lack of which strips the court of any authority to hear the tax collection
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 case. The court has ruled in a line of cases that the lack of approval by the Commissioner is not jurisdictional, it only affects the parties or the cause of action. Further, Memorandum Order V634 delegated the power of the Revenue Commissioner regarding the administration and enforcement of revenue laws and regulations to the respective Regional Directors. Here, it was the Regional Director himself who instituted the case, leaving it unnecessary for further approval. Republic v Salud Hizon – Francisco The issues in this case revolve around the lack of approval of the CIR in filing the collection case and the summary nature of collection cases in relation to the prescription of an action for collection. The court ruled that in accordance with Sec. 221 of the NIRC as implemented by RAO 583, the authority to file complaints for collection of tax liabilities has been validly delegated to the Revenue Regions particularly to the Special Attorneys and Special Counsels designated by the Regional Director. As such, approval of the CIR is no longer necessary. In the case at bar, it was the Chief of the Legal Division with the approval of the Regional Director who instituted the case. Anent the second issue, the petitioner is incorrect in saying that the action has prescribed. When the BIR served warrants of distraint or levy on Hizon, the running of the period to collect was suspended. The summary nature of collection by
distraint or levy allows the enforcement of such collection to proceed beyind the statutory period. Ungab v Cusi * - Cruz While there can be no civil action to enforce collection before the assessment, there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution. The crime is complete when the violator has knowingly and willfully filed fraudulent returns with intent to evade and defeat a part or all of the tax.1 People v Patanao – Cruz Criminal action does not amount to a decision for unpaid taxes. Criminal liability gives birth to the civil obligation while such is the opposite under the income tax law. Civil liability to pay taxes arises from the fact that one has engaged himself in business and not because of any criminal act committed by him. The acquittal in the said criminal cases cannot operate to discharge one from the duty of paying the taxes which the law requires to be paid, since that duty is imposed by statute prior to and independently of any attempts by the taxpayer to evade payment. 1
Logically, it has been ruled that a petition for reconsideration of an assessment may affect the suspension of the prescriptive period for the collection of taxes, but not the prescriptive period of a criminal action for violation of law
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 CIR v CA *- Cruz Before one is prosecuted for wilful attempt to evade or defeat any tax under Sections 253 and 255 of the Tax code, the fact that a tax is due must first be proved. 2 Marcos v CA * - Cruz The Government has two ways of collecting the taxes in question. One, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. Another remedy, pursuant to the lien created by Section 315 of the Tax Code, is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax due the estate. The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should have been pursued through the proper administrative and judicial avenues provided for by law such as protest of assessment under Section 209. 2
the registered wholesale price of the goods, approved by the BIR, is presumed to be the actual wholesale price, therefore, not fraudulent and unless and until the BIR has made a final determination of what is supposed to be the correct taxes, the taxpayer should not be placed in the crucible of criminal prosecution. Herein lies a whale of difference between Ungab and the case at bar
2. Forfeiture Republic v Enriquez – Dela Cruz The warrant of distraint issued by the CIR should be upheld over the writ of execution issued by the RTC because it is settled that the claim of the government predicated on a tax lien is superior to the claim of a private litigant predicated on a judgment. The tax lien attaches not only from the service of the warrant of distraint of personal property but from the time the tax became due and payable. In this case, the distraint and notice of seizure were made before the writ of execution was issued by the Court and that at the time of the writ’s issuance, the barges were no longer properties of the debtor Company. Hence, the court has no jurisdiction over the properties because the power of the court in execution of judgments extends only to properties unquestionably belonging to the judgment debtor.
B. Deficiency Tax Assesment Republic v Ricarte – Dela Cruz The BIR’s action to collect the deficiency tax will not hold because collection should be made within 5 years after tax assessment. In this case, although notice of assessment was allegedly made and sent, no evidence was presented to show that it was actually received. The prescriptive period is counted from the time assessment was made on April 1959, however,
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 from said date until the filing of the case at bar, 6 years and 9 months had already lapsed. Tupaz v Ulep – Dela Cruz In this case, the collection of deficiency tax may be upheld having been made within the 5 year prescriptive period from the last day of filing the return or from the date the return is filed whichever comes later. The violation of nonpayment of taxes can only be committed after service of notice and demand for payment of deficiency taxes upon the taxpayer. This is so because prior to the finality of the assessment, the taxpayer has not committed any violation for nonpayment of the tax. The offense is deemed committed only after the finality of the assessment coupled with the taxpayer’s refusal to pay the taxes within the period allowed by law. Victorias Milling Co. Inc. * - Dela Cruz In this case, the Provincial Board of Assessment Appeals had jurisdiction over the dispute to the exclusion of the Court of First Instance. Petitioner’s claim that the assessments are illegal and void will not hold because assessments only become illegal and void when the assessor has no power to act at all. On the other hand, an assessment is considered erroneous when the assessor has the power but errs in the exercise of that power. Since the Provincial Assessor had the power to make the assessments, but in the exercise of such power he deviated from the
procedure set down by law, in that he employed the "fixed percentage of diminishing book value method" 3 instead of the "straight line method" 4 in depreciating the machineries, logically, the assessment should be considered as erroneous. In which event, Victoria's remedy, pursuant to Section 17 of the Assessment Law, was to appeal to the Provincial Board of Assessment Appeals. By the doctrine of primacy of administrative remedy, the Provincial Board of Assessment Appeals had jurisdiction over the dispute to the exclusion of the Court of First Instance.
3. Principles Governing Assessments CIR V Pascor Realty - Venzuela An assessment is deemed made only when the CIR releases, mails or sends such notice to the 3
Fixed percentage of diminishing book value method – t he rate of yearly depreciation remains the same but the base (book value) upon which the rate is applied diminishes from year to year.
Fixed diminishing book value method: (P100,000 cost of machinery) Book ValueDepreciation1st year5% of100,0005,0002nd year5% of95,0004,7503rd year5% of90,2504,512.50*same rate but diminishing base 4
Straight line method – the rate and the base (cost) are constant.
Straight-line method: (P100,000 cost of machinery) Book ValueDepreciation1st year5% of100,0005,0002nd year5% of95,0005,0003rd year5% of90,0005,000*fixed depreciation rate
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 taxpayer. It must be sent to and received by a taxpayer, and must demand payment of the taxes described therein within a specific period. Necessarily, the taxpayer must be certain that a specific document constitutes an assessment. A revenue officer’s affidavit showing a computation of tax liability, without demand or period of payment cannot be considered an assessment. In addition, the filing of a criminal complaint need not be preceded by an assessment, because in cases of false or fraudulent returns, or failure to file a return, proceedings in court may be commenced without an assessment (Sec. 222). Bonifacia sy po v CTA- Venzuela Tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. In the absence of proof of any irregularities in the performance of duties, an assessment duly made by the BIR examiner and approved by his superior officers will not be disturbed. All presumptions are in favour of the correctness of tax assessments. CIR v Antonio Tuason - Venzuela All presumptions are in favour of the correctness of CIR’s assessment against the taxpayer. It is incumbent upon the taxpayer to prove the contrary. Marcos v CA – Venzuela
The determinations and assessments made by the BIR are presumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that the assessment is erroneous. Failure to present proof of error in the assessment will justify the judicial affirmance of said assessment. CIR v Benipayo * - Noel The assessment determines the tax liability of a taxpayer. As it is imperative to be accurate, the assessment must be based on actual facts. Although there is a presumption of correctness in the assessment, such presumption cannot be based on another presumption as well, not matter how reasonable or logical such may be. The basis of the presumption of correctness must be actual facts. Meralco Securities v Savellano – Noel Mandamus cannot lie to compel the Commissioner to impose a deficiency tax assessment. Mandamus only lies when the act is ministerial in nature, and not discretionary, as assessments are, with regard to the Commissioner Should the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Commissioner choose not to impose deficiency tax assessments due to want of proof, the courts cannot interfere with such discretionary function. City Lumber v Domingo – Noel The order in question only applies to subordinate officers, and not the Commissioner himself. The Regional Directors merely reviewed the case and recommended a lower assessment. The Commissioner may validly delegate the power to assess, however, such assessment is not binding on him. Thus, if the Commissioner makes a different final assessment, he may do so validly.
Republic v Delarama – Mendoza, R The tax must be collected from the estate of the deceased, and it is the administrator who is under the obligation to pay such claim. The notice of assessment should have been sent to the administrator to give effect to such assessment. Since the person liable for the payment of the tax did not receive the assessments, the assessment could not have become final and executory.
Republic v Dela Rama- Mendoza, R The government cannot collect because there is no clear evidence of the transfer of dividends to the heirs. Since there is no clear showing that income in the form of said dividends had really
been received, which is the verb used in Section 21 of the NIRC by the Estate whether actually or constructively and the income tax being collected by the Governemt then would be without any basis. CIR v CA * - Mendoza, R The two-year prescriptive period should be computed from April 2, 1984, when the final adjustment return was actually filed because that is the time of payment of the tax within the meaning of Section 230 of the NIRC. It is only upon such time that the refund is ascertained. When it cannot be ascertained whether there has been an overpayment, in line with the provisions of Section 230 which provides for a two-year period of prescription counted “from the date of the payment of tax” for actions for refund of corporate income tax, the two-year period should be computed from the time of actual filing of the Adjustment Return or Annual Income Tax Return – at this point, the it can already be determined if there has been an overpayment
Commissioner must state in a clear and unequivocal language the decision CIR v Union Shipping Corp. - Fabia, K The CIR assessed Yee Fong Hong, Ltd the total sum of 500K, as deficiency income taxes due for the years 1971 and 1972. Respondent Yee protested the assessment
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 November 25, 1976 – the CIR, without ruling on the protest by Yee, issued a Warrant of Distraint and Levy, which was served on private respondent's counsel. November 27, 1976 – Yee reiterated its request for the reinvestigation of the assessment. However the CIR, again, without acting on the request for reinvestigation and reconsideration of the Warrant of Distraint and Levy, filed a collection suit before the CFI. January 10, 1976 – Respondent filed its Petition for Review of the petitioner's assessment of its deficiency income taxes in the Court of Tax Appeals. According to the petitioner, the Court of Tax Appeals has no jurisdiction over this case. It claims that the warrant of distraint and levy is proof of the finality of an assessment and is tantamount to an outright denial of a motion for reconsideration of an assessment. Among others, petitioner contends that the warrant was issued after the respondent filed a request for reconsideration of subject assessment, thus constituting petitioner's final decision in the disputed assessments. Therefore, the period to appeal to the CTA commenced from the receipt of the warrant on November 25, 1976 so that on January 10, 1976 when respondent corporation sought redress, it has long become final and executory.
ISSUE: W/N the CTA has jurisdiction over the case HELD: Yes There is no dispute that petitioner did not rule on private respondent's motion for reconsideration but left private respondent in the dark as to which action of the Commissioner is the decision appealable to the CTA. Had he categorically stated that he denies private respondent's motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided. Under the circumstances, the CIR, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Advertising Assoc. Inc. - Fabia, K On June 18, 1973 and March 5, 1974 Advertising Associates received a deficiency tax assessment. They were required to pay taxes for being a business agent and independent contractor. April 18 and May 25, 1978, the warrants of distraint and levy were served upon Advertising Associates.
Advertising Associates filed a protest and there
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 were subsequent litigation about the nature of Advertising Assoiates's business. The enforcement of the warrant of distraint and levy was not implemented. When the issue was finally resolved, the CIR sought to collect the taxes. Again, Advertising filed an opposition claiming that the collection of tax had already prescribed because it was done beyond the 5-year period. According to Advertising, Sec, 319 of the Tax Code provides that the tax may be collected by distraint or levy or by a judicial proceeding begun within 5 years after the assessment of the tax. ISSUE: W/N the prescriptive period had already elapsed due to the failure to enforce the warrant of distraint and levy. HELD: No The taxpayer received on June 19, 1973 and MArch 5, 1974, the deficiency assessments herein. The warrants were served on Paril 18 and May 25, 1975, or within five years after the assessment of the tax. Obviously, the warrants were issued to interrupt the 5-year prescriptive period. Its enforcement was not implemented because of the pending protests of the taxpayer and its requests for withdraway of the warrants. CIR v Reyes v CIR - Fabia, K A certain person died and left behind a property in Dasmarinas Village wirth 34M. The BIR issued a preliminary assessment notice in the amount of
14 M. Sumbillo protested the assessment on behalf of the heirs. Later on, the Commissioner of Internal Revenue issued a preliminary collection letter to Reyes (one of the heirs). Subsequently, a Warrant of Distraint or Levy was served upon the estate, followed by Notices of Levy. Reyes protested the notice of levy and eventually proposed a compromise agreement of 1M Pesos. This was rejected by the CIR. According to the CIR, since the estate tax is a charge on the estate and not on the heirs, the latter's financial incapacity is immaterial. The estate failed to pay its taxes and so on June 6, 2000, Reyes was informed that the property would be sold at a public auction. On June 13, 2000, she filed a protest with the BIR Appellate Devision, asserting that the whole tax proceeding are VOID. Without acting on Reyes' protest and offer, the BIR scheduled the property to be sold. But then, a law was passed allowing tax delinquents to compromise their taxes with the BIR. Reyes filed an application for compromise with the BIR. Later on, with the acquiescence of the Secretary of Finance, Reyes paid the 1M and claimed that she was only waiting for the approval of the NEB (Note: the NIRC requires the approval of the NEB in compromise agreements where the tax is more than 1M OR the settlement offered is less than the prescribed minimum rates.) Oddly enough she filed a Motion to Declare the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Compromise Agreement as valid. The CIR countered, saying that there compromise had not been signed by the NEB. ISSUE: Was the assessment against the estate valid? Was the compromise agreement valid? HELD: No, the assessment was invalid. Reyes was not informed in writing of the law and the facts on which the assessment of the estate had been made. She was merely notified of the findings by the CIR, who had simply relied upon the provisions of RA 8424 or the Tax Reform Act. To be simply informed in writing of the investigation being conducted and of the recommendation for the assessment due is nothing but a perfunctory discharge of the tax function of correctly assessing a taxpayer. The act canot be taken to mean that Reyes already knew the law and the facts on which the assessment was based. No, the compromise was invalid. It would be premature for the SC to declare that the compromise on the estate tax liability has been perfected and consummated, considering that the assessment was VOID. Since the assessment is void it cannot, in turn, be used as a basis for the perfection of a tax compromise. Furthermore, nothing has been final and settled. Under Sec 204 (A) where the basic tax involved
exceeds one million pesos or the settlement offered is less than the prescribed minimum rates, the compromise shall be subject to the approval of the National Evaluation Board (NEB) composed of the petitioner and four deputy commissioners. In this case, the petitioner paid the value of the compromise but she had no approval from the NEB. CIR v Enron Subic Power Corp. - Fabia, K “The formal letter of demand calling for payment of the taxpayer's deficiency tax shall state the fact, the law, rules and regulations or jurisprudence on which the assessment is based, otherwise the formal letter of demand and the notice of assessment shall be VOID.”
The finding was that the CIR only wrote the taxes due and the surcharges as well as the penalties, but there was nothing about the law upon which it was based. It was only an itemization of the deductions and rates. According to the CIR, the 5day letter should be sufficient in informing Enron about the legal bases of the assessment. The SC disagreed. The advice of tax deficiency given by the CIR to an employee of Enron, as well as the preliminary five-day letter, were not valid substitutes for the mandatory notice in writing of the legal and factual bases of the assessment. This does not necessarily mean that Enron was
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 informed of the law and facts on which the deficiency tax assessment was made. CIR v BPI- Clavio Tax laws cannot be applied retroactively. It can only operate prospectively. Hence, assessments made pursuant to the (old) law in force at that time, when the only requirement was for CIR to notify the taxpayers of his findings, is valid. The CIR cannot later require an assessment based on law and facts under the amendatory law. Fraud Cases Aznar v CIR * - Clavio The 5-yr prescriptive period to assess tax is applicable only under normal circumstances. But when false returns, fraudulent returns are filed or there is failure to file returns, the 10-yr prescriptive period counted from the time of the discovery of the falsity, fraud or omission should apply.
Fraud contemplated by law is actual and not constructive. It must be intentional and deliberate, to avoid or evade tax liability. Mere mistake or negligence (whether slight or gross) is not equivalent to fraud so as to warrant the imposition of 50% fraud penalty. CIR v Toda * - Clavio
Transactions (sale/transfer of property) prompted to mitigate tax liability (from 35% corporate tax to 5% individual CGT) than for legitimate business purposes constitute tax evasion. The transaction is tainted with fraud. Assuming there was no fraud, however, ITRs not reflecting the true/actual amount gained from the transaction are false. Therefore, the 10-yr prescriptive period to assess, counted from the date of discovery of the falsity, should be applied. Hence, assessment was still within the prescriptive period. 4. No Estoppel Against the Governmnet CIR v Abad – Mendoza, J The CIR made a mistake in classifying the end product of respondents to be denatured alcohol which if true would exempt it from specific tax. Respondents argue that since they were not part in the committee which examined the end product, it should not be held against them. SC refuted this by saying that the manufacturer is responsible for the quality of his products and he cannot escape responsibility by showing that the denaturing committee of the BIR has certified his products to be denatured alcohol. He cannot claim ignorance because the permit issued to him stated that the manufacture of the denatured alcohol should be under his “exclusive responsibility”.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Visayan Cebu Terminal v CIR – Mendoza, J Petitioner had agreed with Bureau of Customs (BOC) that 28% of its gross receipt would go to the latter. BIR however assessed petitioner for deficiency in the 3% percentage tax since the petitioner is still a contractor. The contention is the base of the percentage tax of w/n the 28 percent that goes to the BOC would still be included. As contractor, petitioner is liable for percentage tax but the 28 percent which goes to the BOC should be excluded in computation of the percentage tax. Although petitioner pays to BOC, it does not preclude them to be classified as a contractor. Phil Bank of Com v CIR – Mendoza, J Petitioner pleas for a tax refund after it was filed 2 years after it was due. It relied on RMC No. 785 which extended the prescriptive period from 2 years and now to 10 years contrary to Tax code limiting it to only 2 years. The Court refuted this argument providing that RMC 785 is a mere administrative ruling and is not conclusive and may be ignored if erroneous. The State cannot be put in estoppel by the mistakes of its officials. The RMC, a mere interpretation of the Tax Code, cannot be given effect if it goes contrary to the express provision of a statute which in this case the Tax code 0f 1977 Sec. 230. CIR v CA * Exception – Martinez 1997
Alhambra Cigar used BIR Ruling 473-88 to compute their excise tax; thereafter, the BIR issued Ruling 017-91 repealing said ruling, then assessed Alhambra for deficiency excise tax. Alhambra claims that the ruling cannot be applied retroactively to them; the BIR claims that they cannot be estopped by the mistakes of their agents. BIR states that Alhambra acted in bad faith; however, their failure to consult the BIR before applying BIR Ruling 473-88 is not a sign of bad faith. Admittedly the government is not estopped from collecting taxes legally due because of mistakes or errors of its agents; but like other principles of law, this admits of exceptions in the interest of justice and fair play, as where injustice will result to the taxpayer. CIR v CA * Exception – Martinez 1999 Central Vegetable Manufacturing Co. Inc was assessed 1.5M deficiency miller's tax. CVMC claims that boxes are not "raw materials and supplies used in the milling process" that cannot be claimed as a tax credit against miller's tax due under the old tax code. BIR says otherwise. CTA, CA, SC ruled in favor of CVMC applying the statcon rule that exceptions to the general rule should be strictly construed.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 A similar ruling had been issued four years earlier in favor of CVMC, but BIR claims that this cannot be adhered to because the government cannot be estopped by the mistakes of its agents; but this rule admits of exceptions in the interest of justice and fairplay.
5. Disputable Presumption Basilan Estates v CIR – Martinez – delegated to Paeng Republic v CA – Martinez – delegated to Paeng Marcos v CA – Cajucom In the absence of proof of any irregularities in the performance of official duties, an assessment will not be disturbed. Even an assessment based on estimates is prima facie valid and lawful where it does not appear to have been arrived at arbitrarily or capriciously. The burden of proof is upon the complaining party to show clearly that the assessment is erroneous. Failure to present proof of error in the assessment will justify the judicial affirmance of said assessment. CIR v Bautista – Cajucom Same doctrine as Basilan. Basilan Estates v CIR – Cajucom
An assessment is deemed made when notice to this effect is released, mailed, or sent by the CIR to the taxpayer and it is not required that the notice be received by the taxpayer within the period of prescription. Nava v CIR – Olympia The presumption that a letter duly directed and mailed was received in the regular course of mail cannot apply where none of the required facts to raise this presumption have been shown. These facts are: that the letter was properly addressed with postage pre-paid and that it was mailed. CIR v Pasco Realty * - Olympia An assessment is deemed made only when the collector releases, mails, or sends such notice to the taxpayer. Furthermore, an assessment is not necessary before a criminal complaint can be filed but is necessary for collection such that an affidavit may not take the place of an assessment.
C. Prescription of Right to Assess and Collect Taxes 1. Prescription of Right to Asses Cases Comm v Gonzales – Calalang Facts: Matias Yusay, a resident of Pototan, Iloilo, died intestate leaving two heirs: Jose Yusay, a legitimate child and Lilia Yusay Gonzales, an acknowledged natural child Jose was appointed
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 as the administrator of his etate. On May 11, 1949, he filed an estate and inheritance tax return with the BIR declaring certain properties. This return did not mention any heir. On February 13, 1958 the BIR commissioner issued an assessment of estate and inheritance tax plus surcharge, interest, and compromise payment. Because Jose passed away, the said assessment was sent to his widow, Florencia Vda. De Yusay, who succeeded him in the administration of the estate of Matias. No payment having been made, the BIR Commissioner filed a proof of claim for the estate and inheritance taxes due and a motion for its allowance with the settlement court. Thereafter, on November 17, 1959, Lilia disputed the legality of the assessment claiming that the right to make the same has already prescribed because more than 5 years have elapsed since the filing of the estate and inheritance tax return. On April 13, 1960, Lilia filed a petition for review with the CTA assailing the legality of the said assessment. The CTA decided in favor of Lilia, ruling that the right of the BIR Commissioner to assess the taxes have already prescribed. Issue: Whether or not the right of the BIR Commissioner to make an assessment has already prescribed. Ruling: No, the right has not prescribed.
The Commissioner claims that the period to make an assessment should be 10 years rather than 5 years from the filing of the return because the return filed by Jose Yusay was “fraudulent” as it failed to mention any heir of Matias Yusay. The SC said that fraud must be alleged and proved in the court a quo. Since the same was not done, the SC deemed not to entertain the Commissioner’s assertion that the return was fraudulent. However, the return filed by Jose, albeit not fraudulent, was not a return at all since it is substantially defective because there was an underdeclaration of 92 parcels of land and it did not mention any heir. Therefore, the return filed was no return at all as required by Section 93 of the Tax Code. (Said section lists down the requirement/contents of a return) Accordingly, Section 332 of the Tax Code is applicable. This section states that in case of a false or fraudulent return or when no return is filed, the tax may be assessed within 10 years after the discovery of the falsity, fraud, or omission. In the case at bar, the Commissioner came to know of the identity of the heirs on September 24, 1953 and the underdeclaration in the gross estate of Matias on July 12, 1957. From this latter date up to February 13, 1958(date of assessment), less than 10 years have elapsed. Thus, the right of the Commissioner to assess the tax herein imposed has not prescribed.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Guagua Electric v Collector – Calalang Guagua Electric Light Co. is a a grantee of a municipal franchise of Guagua , Pampangga and Sexmoan, Pampangga. For the period of January 1, 1947 to November 1956, it reported its gross income and paid the corresponding franchise tax of 5% in accordance with Section 259 of the tax code. Believing, however, that it should pay a lower franchise tax as provided for in its franchise, it filed a claim for refund on March 25, 1957. The Commissioner denied the same on the ground that the right to its refund had already prescribed. Guagua Electric elevated the case on appeal with the CTA but the same was dismissed. Subsequently, the SC, in the case of Hoa Hin Co. Vs. David, held that franchise holders under Act 57 are liable for 5% franchise tax under the tax code. Due to this, the Commissioner assessed deficiency franchise taxes against Guagua Electric. In a letter dated March 30, 1961, Guagua Electric contested the latter assessment stating, among others that the right of the Commissioner to assess and/or collect the taxes had already prescribed. Due to a recommendation by the appellate division of the BIR, the Commissioner issued a revised assessment reducing the taxes due against Guagua. It eliminated the deficiency taxes due for the period prior to January 1, 1956 as the right to assess and/or collect these taxes,
according to the recommendation, have already prescribed. Guagua Electric still appealed to the CTA which affirmed the decision of the Comissioner. The CTA ruled that Guagua did not raise the issue of prescription. Hence, this appeal. Issue : Whether or not Guagua Electric failed to raise the issue of prescription of the right of the government to assess/collect the franchise taxes. Ruling: No, Guagua Electric did not fail to raise the issue of prescription. In its letter dated March 30, 1961, it already assailed the right of to assess/collect the tax on the ground of prescription. Moreover, the contention of the Commissioner that Guagua failed to adduce evidence to prove that prescription has set in is without merit. In paragraph 10 of the Commisioner’s answer, he admitted the allegations in paragraph 13 of the petition for review. Paragraph 13 alleged the facts, supported by annexes, constituting prescription. There was therefore no need for the taxpayer to present further evidence in the point. With respect to the issue on surcharge, the SC held that Guagua Electric should not be liable for the same because it acted in good faith when it paid its franchise taxes, albeit lower than that prescribed in the tax code. It only paid in accordance with its franchise.
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 CIR v Suyoc – Calalang Facts: Suyoc Consolidated Mining Company is a mining company operating before the war. It failed to file its income tax return on 1942 for the year of 1941 due to the last war. After liberation, the Congress enacted a law extending the period to file returns for 1941 up to December 31, 1945. Because its records were destroyed as an offshoot of the war, Suyoc Consolidated requested for an extension to file its return until February 15, 1946. The request was granted by the Commissioner. On February 12, 1946, it filed its tentative return. On November 28, 1946, it filed its second amended return. Lastly, on February 6, 1947, it filed its third amended return. The reason for these successive filings is that Suyoc has not yet completely reconstructed its records. On the bases of the second amended return, the Collector assessed the company’s income tax liability on February 11, 1947. The company asked for 1 year extension to pay the amount assessed. The request was granted but only for an extension of 3 months. Suyoc failed to pay within the 3 month period. Accordingly, the Collector sent a letter on November 28, 1950, demanding payment on the tax so assessed. On April 6, 1951, Suyoc asked for a reconsideration and reinvestigation of the assessment which was granted. After a change of the examiner and a series of negotiations, the income tax due the petitioner was reduced by the
Collector to P 24, 438.96. The company was notified of this new assessment on July 28, 1955. The company then filed a petition for review with the CTA on the ground that the right of the government to collect the tax has prescribed. Issue: Whether or not the right of the government to collect the income taxes of Suyoc Consolidated has prescribed. Ruling: No, the right of the government to collect the income taxes has not prescribed. The petitioner refrained from collecting the tax by distraint or levy or by a proceeding in court within the 5 year period from the filing of the second amended final return due to the several requests of respondent. (Requests for extension and requests for reconsideration and reinvestigation) After inducing petitioner to delay collection as he in fact did, it is most unfair for respondent to now take advantage of such desistance to elude his deficiency income tax liability to the prejudice of the government invoking the ground of prescription. The SC said that there is no precedent in this jurisdiction dealing with the matter at hand. However, it took a look at several American cases. One of which states that “He who prevents a thing from being done may not avail himself of the nonperformance which he has himself occasioned, for the law says to him in effect “this is your own act, and therefore you are not damnified. “”
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Republic v Lopez – Martin The five-year prescriptive period fixed by Section 332(c) of the Internal Revenue Code within which the Government may sue to collect an assessed tax is to be counted from the last revised assessment resulting from a reinvestigation asked for by the taxpayer. Where a taxpayer demands a reinvestigation, the time employed in reinvestigating should be deducted from the total period of limitation. Hence, from the period that intervened between the first revised assessment (29 May 1954) and the filing of the complaint (13 August 1960) is deducted the time consumed in considering and deciding the taxpayer's subsequent petition for reconsideration and reinvestigation (from 16 January 1956 to 22 April 1960), it will be seen that only one (1) year, three (3) months, and six (6) days, counted against the government. Thus, Prescription has not set in. Comm v Sison – Martin The period of time between June 1952 to October 1956, should be excluded from the computation of the five-year prescription, because of the petition made by the Sisons for re-consideration or reinvestigation. It is settled that the five-year period of Sec. 332 of the Internal Revenue Code (prescription, like 331) is to be counted from the last revised assessment resulting from a
reinvestigation asked for by the taxpayer; and that where a taxpayer demands a reinvestigation, the time employed in reinvestigating should be deducted from the total period of limitation. Bisaya Land Transpo v Collector – Martin When there is no explicit provision imposing the duty to file a return, and penalizing noncompliance therewith, duty to file a return but the tax is such that its amount cannot be ascertained without data pertinent thereto, the Collector of Internal Revenue may by appropriate regulations require the filing of the necessary returns. In any event, with or without such regulations, it is to the interest of the taxpayer to file said return if he wishes to avail himself of the benefits of section 331. If, this notwithstanding, he does not file a return, then an assessment may be made within the time stated in section 332(a). Butuan Sawmill v CTA – Martin CIR v Ayala Securities – Docena The 10-year prescriptive period is only applicable to fraud cases or falsity of return. If there is no proof of fraud, or falsity of return with an intention to evade taxes, said period is inapplicable. The period applicable is the 5-year prescriptive period. Aznar v CIR – Docena Fraud cannot be presumed but must be proven. Fraudulent intent could not be deduced from
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 mistakes however frequent they may be, especially if such mistakes emanate from erroneous entries or erroneous classification of items in accounting methods utilized for determination of tax liabilities. The 50% fraud penalty cannot be imposed if fraud is not proved. CIR v Javier Jr. – Docena The rule in fraud cases is that the proof “must be clear and convincing” such that it would be sufficient to sustain a judgment on the issue of correctness of the deficiency itself apart from the fraud penalty. If fraud is not proved, there is no reason for imposing the 50% surcharge provided in the code. Castro v Collector – Docena Laws are generally prospective, not retroactive. An amendment introduced to the Tax Code several years after the assessment on a taxpayer cannot be applied retroactively. Republic v Acevedo – Jularbal An action for collection of deficiency income tax must be commenced within five years after the assessment of the tax. Any waiver of the statute of limitations must also be executed within the original five-year period within which suit could be commenced. A request for reinvestigation which is not acted upon does not suspend the running of the period for filing an action for collection.
Sinforosa Alca v CA – Jularbal An extension of the period of limitation is different from the waiver of prescription. A waiver made after the action to collect has already prescribed is not just an extension of the period of limitation but a renunciation of the right to invoke the defense of prescription which was then already available to the taxpayer. There is nothing unlawful nor immoral about this kind of waiver; just like any other right, the right to avail of the defense of prescription is waivable. RP v Lim De Yu – Jularbal If fraud is not proved, the period of limitation for assessment is five years from the filing of the return. The five-year period for assignment may be extended via waiver of the statute of limitations which should be done before the expiration of the original period. CIR v BF Goodrich - Ursua Boise Cascade v CIR- Ursua Carnation v CIR - Ursua Marcos V CA – Ursua CIR v Rascor – Raso The issuance of an assessment is vital in determining the period of limitation regarding its proper issuance and the period within which to protest it. Section 203 of the NIRC provides that internal revenue taxes must be assessed within three years from the last day within which to file
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 the return. Section 222, on the other hand, specifies a period of ten years in case a fraudulent return with intent to evade was submitted or in case of failure to file a return. Also, Section 228 of the same law states that said assessment may be protested only within thirty days from receipt thereof. Necessarily, the taxpayer must be certain that a specific document constitutes an assessment. Otherwise, confusion would arise regarding the period within which to make an assessment or to protest the same, or whether interest and penalty may accrue thereon. Tupaz v Ulep – Raso A new law (BP 700) shortening the assessment period from five years to three years shouldn’t apply to the petitioner and shouldn’t constitute as grounds for prescription of the action since the law expressly stated the year that it would take effect and the non-payment of taxes occurred prior to the effectivity of the said law.
Internal revenue taxes are self-assessing and no further assessment by the government is required to create the tax liability. An assessment, however, is not altogether inconsequential; it is relevant in the proper pursuit of judicial and extra judicial remedies to enforce taxpayer liabilities and certain matters that relate to it, such as the imposition of surcharges and interest, and in the application of statues of limitations and in the establishment of tax liens
BPI v CIR – Raso The filing of a protest letter doesn’t constitute as a valid ground to suspend the running of the prescriptive period.
The statute of limitations on collection may only be interrupted or suspended by a valid waiver executed in accordance with (at the time of the case) paragraph (d) of Section 223 of the Tax Code of 1977, as amended, and the existence of the circumstances enumerated in Section 224 of the same Code, which include a request for reinvestigation granted by the BIR Commissioner. Even when the request for reconsideration or reinvestigation is not accompanied by a valid waiver or there is no request for reinvestigation that had been granted by the BIR Commissioner, the taxpayer may still be held in estoppel and be prevented from setting up the defense of prescription of the statute of limitations on collection when, by his own repeated requests or positive acts, the Government had been, for good reasons, persuaded to postpone collection to make the taxpayer feel that the demand is not unreasonable or that no harassment or injustice is meant by the Government, as laid down by this Court in the Suyoc case. CIR v Primetown Property Group - Raso
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 Under Section 229 of the Tax Code, a such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment. The subject of contention is how long exactly is the period of “two years” to determine the date of prescription. In this case, the Court applied manner in which the Administrative Code of 1987 counts legal period. In the said code, acalendar month is “a month designated in the calendar without regard to the number of days it may contain.” It is the “period of time running from the beginning of a certain numbered day up to, but not including, the corresponding numbered day of the next month, and if there is not a sufficient number of days in the next month, then up to and including the last day of that month.”[ To illustrate, one calendar month from December 31, 2007 will be from January 1, 2008 to January 31, 2008; one calendar month from January 31, 2008 will be from February 1, 2008 until February 29, 2008.
2. Prescription of Right to Collect Comm v Wyett Suaco * - Fragante A request for reconsideration or reinvestigation tolls the prescriptive period to collect and starts to run again when the request is denied. Even though a letter or request is not captioned as a reconsideration or reinvestigation of the assessment it will be deemed such a request if the ultimate relief or remedy asked by the taxpayer will result in the audit or examination of the
records of the taxpayer to determine the tax liability. 3. Suspension of Prescriptive Period Cases CIR v Sison – Fragante The five-year period of sec. 332 of the Internal Revenue Code (prescription, like 331) is to be counted from the last revised assessment resulting from a reinvestigation asked for by the taxpayer; and that where a taxpayer demands a reinvestigation, the time employed in reinvestigating should be deducted from the total period of limitation. Republic v Ablaza – Fragante A request for detailed computation of an alleged tax liability is not a request for reinvestigation which will toll/suspend the prescriptive period to collect. CIR v Capitol Subd- Dialino The period for prescription of the action to collect taxes is interrupted when the taxpayer requests for a review or reconsideration of the assessment, and starts to run again when said request is denied. Capitol did not specifically used the words “review” or “reconsideration” but its requests for information on disallowed items, for explanation
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 of disallowances, and for reinvestigation of the same, all of which were denied, interrupted the period of prescription to collect the taxes.
collection of taxes. Thus, even though the CTA’s dismissal and the SC’s affirmation were made five years after the final assessment, the CIR is not prohibited from collecting the taxes due.
Palanca V CIR- Dialino A judicial action for the collection of taxes is begun by the filing of the complaint with the proper court of first instance, or where the assessment is appealed to the CTA, by filing an answer to the taxpayer’s petition for review wherein payment of the tax is prayed for. The summary remedy of distraint and levy is begun by the issuance of a warrant of distraint and levy which stops the running of prescription of the right to collect taxes although the warrant is not actually executed or carried out. The estate’s many requests for postponement, reinvestigation, revaluation of the properties, or other matters delayed the execution of the warrant. Were it not for said requests, the warrant would have been fully executed well within the period prescribed by law.
CIR v Algue- Arriola According to RA 1125, the appeal may be made within 30 days after receipt of the decision or ruling challenged. It is true that as a rule the warrant of distraint and levy is “proof of the finality of the assessment; Exception is where there is a letter of protest after receipt of notice of assessment. The proven facts is that 4 days after private respondent received the petitioner's notice of assessment, it filed its letter of protest. It thus had the effect of suspending the reglementary period which started on the date the assessment was received. The period started running again only when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it.
Republic v Ker – Dialino The running of the prescriptive period to collect taxes shall be suspended for the period during which the CIR is prohibited from beginning a distraint and levy or instituting a proceeding in court. Ker’s petition for review in the CTA and its appeal to the SC legally prevented the Commissioner from instituting an action in the CFI for the
CIR v Wyeth Suaco Laboratories- Arriola Settled is the rule that the prescriptive period provided by law to make a collection by distraint or levy or by a proceeding in court is interrupted once a taxpayer requests for reinvestigation or reconsideration of the assessment. Wyeth Suaco admitted that it was seeking reconsideration of the tax assessments as shown in a letter of its President and General Manager. Although the
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 protest letters did not categorically state or use the words “reinvestigation” and “reconsideration”, the same are to be treated as letters of reinvestigation and reconsideration. These letters of Wyeth Suaco interrupted the running of the five-year prescriptive period to collect the deficiency taxes. The period started to run again when the BIR served the final assessment to Wyeth Suaco. CIR v Union Shipping Corp- Arriola Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. Petitioner did not rule on private respondent's motion for reconsideration which left private respondent in the dark as to which action of the CIR is the decision appealable to the CTA. The CIR, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, its was only when private respondent received the summons on the civil suit for collection of deficiency income that the period to appeal commenced to run.
D. Remedies of the Taxpayer 1. Remedies before payment of the tax Delta Motors Co. v CIR * - Escueta (CTA Case 3782, May 21, 1986) A taxpayer may contest the assessment made by
the BIR by presenting evidence to substantiate the errors that are claimed to have been committed by the CIR in making the assessments. “All presumptions are in favor of the correctness of the tax assessments.” The burden of proof is on the purchaser to show the contrary. Upon failure to appear, prosecute for an unreasonable length of time, the petition, upon motion may be dismissed and adjudicated based on merits, unless otherwise provided by the Courts. Basa v Republic * (compare with CTA Jurisdiction now) – Escueta Appeals by the taxpayer regarding assessments of the BIR should be made to the Tax Courts not to the CFI.
The taxpayer did not contest the asessment, hence it becomes final. Then the BIR files a civil case (i.e., collection suit) with CFI. At this stage, the taxpayer can no longer contest/appeal the assessment. After the assessment has been made, the proper remedy it to file an appeal with the Tax Court. Having failed to do so, the assessment has become final. Current rule: Section 7 (a) (1) of RA 1125 as amended by RA 9282 provides that the CTA shall exercise exclusive appellate jurisdiction to review by appeal decisions of the CIR in cases involving
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National internal revenue or other laws administered by the BIR. Note: The entire Section 7 enumerates the jurisdiction of the CTA. Marcos v CA – Escueta If there is any isue as to the validity of the BIR’s decision to assess the taxes the proper remedy is to pursue the proper admiistrative and judicial avenues provided by law (i.e., Section 228 if the NIRC: Protesting of an assessment and not via Petition for Certiorari under the pretext of grave abuse of discretion.
2. Taxpayers Defenses against the assessment Aguinaldo Industries Co v CIR – Imperial Since exemptions are only statutory graces, in claiming items as deductibles, the taxpayer must show that its claimed deductions clearly come within the language of the law, otherwise they will not be allowed. Abra Valley College v Aquino – Imperial The Constitution provided for exemptions of all lands buildings and improvements used exclusively for educational purposes. The test of
exemption is the use of the property for purposes mentioned in the Constitution. Reasonable interpretation of the phrase “used exclusively” extends to those facilities which are incidental to and reasonably necessary for the accomplishment of the said purposes. CIR v P&G – Imperial In claims for refunds or tax credits, a written claim must be filed with the BIR by a taxpayer which is defined as any person who is subject to tax. As a withholding agent is made personally liable for such tax which he is required to deduct and withhold, he is deemed a taxpayer for purposes of claiming refunds or tax credits. Likewise, for the reduced rate of 15% to apply, the NIRC does not require that the domicile of the non-resident foreign corporation give a “deemed paid” tax credit but only that it “shall allow” a credit against the tax due on said corporation taxes deemed to have been paid in the Philippines.
3. Remedies after payment of tax Bermejo v Collector * -Gran Chemphil v CIR *- Gran CIR v Ca * -Gran CC & CIR v CA & Planters * - Gran Gibbs v CIR * - Cua ACCRA Investment Corp v CA - Cua CIR v TMX Sales - Cua Citibank v CIR - Cua
Tax Digests and Doctrines of 3D BATCH 2012 under Atty. Gonzales TCC, LGC and Remedies under the Tax Code of 1997 CIR v Wander Phil Inc - Plazo CIR v P&G - Plazo CIR v Jose Concepcion - Plazo 4. Judicial Remedies Lascona Land v CIR * - Plazo Surigao electric v CA * Sia The failure of a taxpayer to lodge his appeal within the prescribed period of 30 days from the notice of final assessment bars his appeal and renders the questioned decision final and executory. Remark on the case: The Court, in its obiter, pointed out that the Commissioner of Internal Revenue should always indicate to the taxpayer in clear and unequivocal language whenever his action on an assessment questioned by a taxpayer constitutes his final determination on the disputed assessment. Although the Court pointed this out, it still construed the letters of the commissioner demanding for payment and a threat of legal action in case of default as final assessment already (In this case, the Court did not mention that the Commissioner said in clear and unequivocal language that the assessment was final.) CIR v Villa* - Sia A taxpayer must first contest an assessment in the Bureau of Internal Revenue before filing a
petition for review in the Court of Tax Appeals. Absent said contest renders the appeal premature and the Court of Tax Appeals will have no jurisdiction to entertain said appeal. Advertising Assoc Inc V CIR – Sia The Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in administrative action. Remark: This doctrine was actually from surigao case but was merely an obiter therein. Dayrit v Cruz * - Sia The remedy of an aggrieved taxpayer is not without any limitation. A taxpayer's right to contest assessments, particularly the right to appeal to the Court of Tax Appeals, may be waived or lost as in this case. In this case, the assessment has already become final and executory because even if the petitioners requested a 30 day extension to file their position paper, they did not file any. Hence, petitioners' letter for a reconsideration of the assessments is nothing but a mere scrap of paper.
Procedure of Appeal
