CIR vs.

Algue
Facts: Algue, engaged in an engineering corporation, claims tax deductions in the amount of P75,000.00 alleging that
such amount are promotional fees, thus, in accord with the provisions of the Tax Code as being ordinary and
necessary expenses. The CIR disallowed the deductions.
Issue: WON the CIR was correct in disallowing the tax deductions.
Held: Negative.
The claimed deduction by the private respondent was permitted under the Internal Revenue Code and should
therefore not have been disallowed by the CIR.
It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for
lack of the motive power to activate and operate it. The government for its part, is expected to respond in the form
of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material
values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an
arbitrary method of exaction by those in the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic
regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the
taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax
collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not
been observed
CIR vs. Tokyo Shipping Co., Ltd.
Facts: Tokyo shipping is a foreign corporation which owns and operates a vessel. The vessel was chartered by a
certain Nasutra to load raw sugar in the Phil thru its representative. Thus, Tokyo Shippings representative made a
pre-payment of the required income and common carriers taxes. Upon arrival at the port, the vessel found no sugar
for loading, thus, claimed for a tax refund. The CIR failed to act promptly, thus, respondent went to CTA which
decided in their favor. The CIR claims otherwise.
Issue: WON Tokyo Shipping is entitled to a tax refund.
Held: Affirmative.
Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident foreign corporation engaged in the
transport of cargo is liable for taxes depending on the amount of income it derives from sources within the
Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income
sourced from the Philippines. The respondent court held that sufficient evidence has been adduced by the private
respondent proving that it derived no receipt from its charter agreement with NASUTRA.
Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund without any
unreasonable delay what it has erroneously collected.
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution
to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the
tax collector kill the hen that lays the golden egg. And, in order to maintain the general publics trust and
confidence in the Government this power must be used justly and not treacherously.






BPI-Family Savings Bank vs. CA
Facts: BPI claims for a tax refund of P112,491. As appearing in its 1989 ITR, BPI has a total of P297,492 refundable
taxes. BPI declared in its 1989 ITR that it would apply the excess withholding tax as a tax credit for the year 1990.
Subsequently, however, BPI claimed for a tax refund since in the year 1990 it suffered losses, thus, could not have
applied said amount as tax credit. The CIR and CTA denied this on the ground that BPI failed to show its 1990 ITR
which would show that the amount claimed was not applied as a tax credit.
Issue: WON BPI is entitled to a tax refund.
Held: Affirmative.
Evidence shows that petitioner suffered a net loss in 1990, thus, it could not have applied the amount claimed as tax
credits.
Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted,
should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense
of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so
must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must
lead by its own example of honor, dignity and uprightness.

Chavez vs. Ongpin
Facts: Chavez, owner of some number of parcels of land challenges the constitutionality of EO 73, which increased
the assessment for real property taxes. Intervenor Realty Owners Association of the Phil (ROAP) also challenged the
constitutionality of EO 73 and EO 464, the latter order having been the basis for the enactment of EO 73.
Issue: Whether EO 73 imposes unreasonable increase in real property taxes, thus, should be declared
unconstitutional.
Held: Negative.
The attack on Executive Order No. 73 has no legal basis as the general revision of assessments is a continuing process
mandated by Section 21 of Presidential Decree No. 464. If at all, it is Presidential Decree No. 464 which should be
challenged as constitutionally infirm. However, Chavez failed to raise any objection against said decree. It was
ROAP, the intervenor, which questioned the constitutionality thereof.
To continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the
increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system.
Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be
adequate to meet government expenditures and their variations.







Roxas et al vs CTA
Facts: Roxas Y Cia is a partnership managing agricultural lands with a total land area of 19,000 ha (Known as the
Nasugbu farmlands). The tenants therein wanted to acquire the land they till, thus the government persuaded Roxas
Y Cia to sell to it some of its lands. Roxas Y Cia agreed but it turned out that the govt does not have sufficient funds
to pay for such lands, hence, Roxas Y Cia took the burden of selling the lands directly to the tenants on installment
basis. Because of Roxas Y Cias act of making profits from the purchase and sale of securities, the Commissioner of
Internal Revenue demanded from it fixed tax of dealers securities, hence, 100% of the profits made therefrom was
taxed.
Issue: WON the assessment made by the CIR is correct (of taxing 100% of the profits made from the sale of the lands
to the tenants made by Roxas).
Held: Negative.
It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for
generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of our
Government to allocate lands to the landless.
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution
to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the
tax collector kill the hen that lays the golden egg. And, in order to maintain the general publics trust and
confidence in the Government this power must be used justly and not treacherously. It does not conform with Our
sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later
on to penalize him for duly answering the urgent call.
In fine, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to Section 34
of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale thereof is capital
gain, taxable only to the extent of 50%.

Phil Health Care Providers Inc vs CIR
Facts: Phil Health Care Providers is a corporation engaged in providing medical/health care programs to its members
who pay annual membership fees. The CIR demanded from the corporation deficiency taxes, constituting
Documentary Stamp Tax (DST) imposed upon on its health care agreements. The corporation sought the cancellation
of the DST assessments, among others, contending that it is a Health Maintenance Org (HMO) and not an insurance
company, thus, not liable for DST on its health care agreements. It also asserts that the assessed DST which amounts
to P376 million is way beyond its net worth ofP259 million.
Issue: WON the corporation is liable for the payment of DST on its health care agreements.
Held: Negative.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its
very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature
which imposes the tax on the constituency who is to pay it.So potent indeed is the power that it was once opined
that the power to tax involves the power to destroy.
Given the realities on the ground, imposing the DST on petitioner would be highly oppressive. It is not the purpose of
the government to throttle private business. On the contrary, the government ought to encourage private enterprise.
The corporation, just like any concern organized for a lawful economic activity, has a right to maintain a legitimate
business. As aptly held in Roxas, et al. v. CTA, et al.:
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with caution
to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest the
tax collector kill the hen that lays the golden egg.
Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses because
of a tax imposition may be an acceptable consequence but killing the business of an entity is another matter and
should not be allowed. It is counter-productive and ultimately subversive of the nations thrust towards a better
economy which will ultimately benefit the majority of our people.
Philex Mining Corp vs. CIR
Facts: The BIR sent a letter to Philex asking the latter to settle its tax liabilities. Philex protested the demand
contending that it has pending claims for VAT input credit/refund for taxes it paid for the previous years. Thus,
Philex wants to set-off or apply the concept of compensation in its favor. The BIR refused. The CTA, affirmed by CA,
ruled against Philex stating that taxes cannot be subject to set-off on compensation since claim for taxes is not a
debt or contract.
Issue: WON the pending claim for refund of Philex may be applied against an existing tax liability; or, WON Philex
may set-off its tax liability against its pending claims for refund.
Held: Negative.
1. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not
creditors and debtors of each other. There is a material distinction between a tax and debt. Debts are due to the
Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity;
2. Philexs reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines Inc., wherein the SC
ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet been
approved by the Commissioner, is no longer without any support in statutory law.
It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d) of
the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the
same provision upon which the Itogon-Suyoc pronouncement was based was omitted. Accordingly, the doctrine
enunciated in Itogon-Suyoc cannot be invoked by Philex.
Gerochi, et al vs. Dept of Energy
Facts: Gerochi et al seeks the declaration of Sec. 34 of RA 9136 (Electric Power Industry Refor Act of 1991-EPIRA)
which imposes a Universal Charge against all electric end-users on a monthly basis, as unconstitutional on the ground
of: such universal charge is a tax, which power to impose is a strictly legislative function, thus, constitutes an undue
delegation of legislative power on the part of the Energy Regulatory Commission (ERC).
Issue: Whether the universal charge is a tax; and, whether there is an undue delegation of legislative taxing power to
ERC.
Held: Both negative.
1. The conservative and pivotal distinction between power to tax and police power rests in the purpose for which
the charge is made. If generation of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not
make the imposition a tax.
It can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the exercise of the States police
power. Public welfare is surely promoted.
Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police power.
The Special Trust Fund reasonably serves and assures the attainment and perpetuity of the purposes for which the
Universal Charge is imposed, i.e., to ensure the viability of the countrys electric power industry.
2. A logical corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as
expressed in the Latin maxim potestas delegata non delegari potest (what has been delegated cannot be
delegated).
All that is required for the valid exercise of this power of subordinate legislation is that the regulation be germane to
the objects and purposes of the law and that the regulation be not in contradiction to, but in conformity with, the
standards prescribed by the law. These requirements are denominated as the completeness test and the sufficient
standard test.
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all
its essential terms and conditions, and that it contains sufficient standards.
CIR vs. Lingayen Gulf Electric Power Co & CTA
Facts: Lingayen operates an electric power plant, in which its municipal franchise imposes upon it the payment of
not more than 2% franchise tax. Subsequently its franchise was approved by the Pres of the Phil. As such, the BIR
demanded from it the payment of deficiency taxes applying franchise tax rates of 5% on gross receipts. Lingayen
refused, as according to it, it made overpayment. Pending the cases, RA 3843 was approved which granted Lingayen
legislative franchises for the operation of the electric light, etc., which imposed upon it the payment of only 2%
franchise tax, effective from the date the original municipal franchise was granted. Thus, the CTA absolved Lingayen
from all its liabilities. The CIR submits that RA 3843 in so far as it grants Lingayen the payment of only 2% Franchise
tax is discriminatory and hence, violative of the rule on equality and uniformity of taxation as others are subject to
5% franchise tax.
Issue: WON the SC may determine the validity of RA 3843 as to its imposition of a 2% franchise tax in favor of
Lingayen.
Held: Negative.
The SC has no authority to inquire into the wisdom of such act. R.A. No. 3843 did not only fix and specify a franchise
tax of 2% on its gross receipts, but made it in lieu of any and all taxes, all laws to the contrary notwithstanding,
thus, leaving no room for doubt regarding the legislative intent. Charters or special laws granted and enacted by the
Legislature are in the nature of private contracts. They do not constitute a part of the machinery of the general
government. They are usually adopted after careful consideration of the private rights in relation with resultant
benefits to the State in passing a special charter the attention of the Legislature is directed to the facts and
circumstances which the act or charter is intended to meet. The Legislature consider (sic) and make (sic) provision
for all the circumstances of a particular case.
CIR vs. Judge Santos
Facts: The BIR examined the books and accounting records of Jewelry by Marco & Co. for excise tax purposes.
Alleging that the provisions of the Tariff and Customs Code are oppressive and confiscatory, presenting on its behalf
data on the differences of tax rates in Asia, sought said Code to declare unconstitutional. Judge Santos, an RTC
judge, ruled in favor of Jewelry by Marco & Co, and declared that said law is inoperative and without force and
effect as far as Jewelry by Marco & Co is concerned, or unconstitutional.
Issue: WON the RTC judge correctly declared some provisions of the Tariff and Customs Code as unconstitutional.
Held: Negative.
The trial court is not the proper forum for the ventilation of the issues raised by the private respondents. The
arguments they presented focus on the wisdom of the provisions of law which they seek to nullify. Regional Trial
Courts can only look into the validity of a provision, that is, whether or not it has been passed according to the
procedures laid down by law, and thus cannot inquire as to the reasons for its existence. Granting arguendo that the
private respondents may have provided convincing arguments why the jewelry industry in the Philippines should not
be taxed as it is, it is to the legislature that they must resort to for relief, since with the legislature primarily lies the
discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) andsitus (place) of
taxation. This Court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative
judgment.
"The judiciary does not pass upon questions of wisdom, justice or expediency of legislation." And fittingly so, for in
the exercise of judicial power, we are allowed only "to settle actual controversies involving rights which are legally
demandable and enforceable", and may not annul an act of the political departments simply because we feel it is
unwise or impractical. This is not to say that Regional Trial Courts have no power whatsoever to declare a law
unconstitutional. In J.M. Tuason and Co. v. Court of Appeals, we said that [p]lainly the Constitution contemplates
that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks
of appellate review offinal judgments of inferior courts in cases where such constitutionality happens to be in
issue. This authority of lower courts to decide questions of constitutionality in the first instance reaffirmed in Ynos
v. Intermediate Court of Appeals. But this authority does not extend to deciding questions which pertain to
legislative policy.



Mactan Cebu Intl Airport (MCIAA) vs Judge Marcos
Facts: MCIAA, since the time of its creation, enjoyed the privilege of exemption from payment of realty taxes in
accordance with its charter. The Office of the Treasurer of the City of Cebu, however, demanded from it the
payment of realty taxes over several parcels of land belonging to it. Mciaa was compelled to pay under protest, thus,
it filed a petition for declaratory relief with the RTC. The latter dismissed the petition on the ground that under
Sections 193 and 234 of the Local Govt Code of 1991 (LGC), such exemption from taxes in favor of GOCCs had been
expressly cancelled/withdrawn.
Arguments:
MCIAA: Invokes Section 133 of the LGC which puts limitations on the taxing powers of LGUs on an instrumentality of
the govt performing governmental functions (i.e. carrying out government policies of promoting and developing the
Central Visayas and Mindanao regions as centers of intl trade & tourism x x x)
Respondents: MCIAA is a GOCC whos tax exemption privilege had been withdrawn by virtue of Sections 193 & 234 of
the LGC.
Issue: WON MCIAA< a GOCC, is exempted from the payment of realty taxes pursuant to Section 133 of the LGCC>
Held: Negative. 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 MCIAA can show that the
parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by virtue
of ownership, character, or use of the property.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its
very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature
which imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations thereon may be
imposed by the people through their Constitutions.

Our Constitution, for instance, provides that the rule of taxation
shall be uniform and equitable and Congress shall evolve a progressive system of taxation.

So potent indeed is the
power that it was once opined that the power to tax involves the power to destroy.

Verily, taxation is a destructive
power which interferes with the personal and property for the support of the government. Accordingly, tax statutes
must be construed strictly against the government and liberally in favor of the taxpayer.

But since taxes are what we
pay for civilized society,

or are the lifeblood of the nation, the law frowns against exemptions from taxation and
statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of
the taxing authority. A claim of exemption from tax payment must be clearly shown and based on language in the
law too plain to be mistaken.

Elsewise stated, taxation is the rule, exemption therefrom is the exception.

However, if
the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not
apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled
by the government in the course of its operations.


Tan Tiong Bio, et al vs CIR; GR L-15778
Facts: A corporation Central Syndicate, allegedly purchased from Dee Hong Lue stock of surplus properties from the
Foreign Liquidation Commission. Thus, it remitted the amount of P43,750 as deposit for the sales tax. Later on, it
claimed refund for the excess in the payment of the sales tax due to the adjustment and reduction of the purchase
price. However, an agent of the CIR reported that it was the syndicate who was the actual importer and original
seller of the surplus goods. Thus, the syndicate is liable to pay the whole amount of the sales tax. The CTA rendered
a decision holding the incorporators of the syndicate to be severally liable, the syndicates personality having had
expired.
Issue: WON the petitioners, the successors-in-interest of the defunct Central Syndicate, can be hel personally liable
for the sales taxes.
Held: Affirmative.
Petitioners are the beneficiaries of the defunct corporation and as such should be held liable to pay the taxes.
However, there being no express provision requiring the stockholders of the corporation to be solidarily liable for its
debts which liability must be express cannot be presumed, petitioners should be held liable for the tax in question
only in proportion to their shares in the distribution of the assets of the defunct corporation.


Lutz vs. Araneta (CIR)
Facts: Lutz, in his capacity as judicial administrator of the intestate estate of a certain Ledesma, assails the
constitutionality of the imposition of export taxes under Commonwealth Act No. 567, otherwise known as the Sugar
Adjustment Act. Lutz alleges that the same is unconstitutional and void, being levied for the aid of the sugar
industry exclusively, which in his opinion is not a pub;lic purpose for which a tax may be constitutionally levied. The
action was dismissed by the CFI.
Issue: WON the imposition of the tax in question is unconstitutional, not being levied for public purpose.
Held: Negative.
The basic defect in the plaintiffs position is his assumption that the tax provided for in Commonwealth Act No. 567
is a pure exercise of the taxing power. Analysis of the Act, and particularly of section 6 (heretofore quoted in full),
will show that the tax is levied with a regulatory purpose, to provide means for the rehabilitation and stabilization of
the threatened sugar industry. In other words, the act is primarily an exercise of the police power. It was competent
for the legislature to find that the general welfare demanded that the sugar industry should be stabilized.
Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to
experimental stations to seek increase of efficiency in sugar production, utilization of by-products and solution of
allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations, without
any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private
purposes.

GOMEZ v. PALOMAR
GR No. L-23645, October 29, 1968
25 SCRA 827

FACTS: Petitioner Benjamin Gomez mailed a letter at the post office in San Fernando,
Pampanga. It did not bear the special anti-TB stamp required by the RA 1635. It was
returned to the petitioner. Petitioner now assails the constitutionality of the statute
claiming that RA 1635 otherwise known as the Anti-TB Stamp law is violative of the
equal protection clause because it constitutes mail users into a class for the purpose of
the tax while leaving untaxed the rest of the population and that even among postal
patrons the statute discriminatorily grants exemptions. The law in question requires an
additional 5 centavo stamp for every mail being posted, and no mail shall be delivered
unless bearing the said stamp.

ISSUE: Is the Anti-TB Stamp Law unconstitutional, for being allegedly violative of the
equal protection clause?

HELD: No. It is settled that the legislature has the inherent power to select the subjects
of taxation and to grant exemptions. This power has aptly been described as "of wide
range and flexibility." Indeed, it is said that in the field of taxation, more than in other
areas, the legislature possesses the greatest freedom in classification. The reason for
this is that traditionally, classification has been a device for fitting tax programs to local
needs and usages in order to achieve an equitable distribution of the tax burden.
The classification of mail users is based on the ability to pay, the enjoyment of a
privilege and on administrative convenience. Tax exemptions have never been thought
of as raising revenues under the equal protection clause.



Planters Products Inc vs Fertiphil Corp G.R. No. 166006 March 14, 2008
FACTS: Petitioner PPI and respondent Fertiphil are private corporations incorporated under
Philippine laws, both engaged in the importation and distribution of fertilizers, pesticides and
agriculturalchemicals.Marcos issued Letter of Instruction (LOI) 1465, imposing a capital
recovery component of Php10.00 perbag of fertilizer. The levy was to continue until adequate
capital was raised to make PPI financiallyviable. Fertiphil remitted to the Fertilizer and
Pesticide Authority (FPA), which was then remitted thedepository bank of PPI. Fertiphil paid
P6,689,144 to FPA from 1985 to 1986.After the 1986 Edsa Revolution, FPA voluntarily stopped
the imposition of the P10 levy. Fertiphil demanded from PPI a refund of the amount it remitted,
however PPI refused. Fertiphil filed a complaintfor collection and damages, questioning the
constitutionality of LOI 1465, claiming that it was unjust,unreasonable, oppressive, invalid and
an unlawful imposition that amounted to a denial of due process.PPI argues that Fertiphil has no
locus standi to question the constitutionality of LOI No. 1465 because itdoes not have a
"personal and substantial interest in the case or will sustain direct injury as a result of its
enforcement." It asserts that Fertiphil did not suffer any damage from the imposition
because"incidence of the levy fell on the ultimate consumer or the farmers themselves, not
on the sellerfertilizer company.
ISSUE: Whether or not Fertiphil has locus standi to question the constitutionality of LOI No.
1465.What is the power of taxation?
RULING: Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a
mereprocedural technicality which may be waived.The imposition of the levy was an exercise of
the taxation power of the state. While it is true that thepower to tax can be used as an
implement of police power, the primary purpose of the levy was revenuegeneration. If the
purpose is primarily revenue, or if revenue is, at least, one of the real and substantialpurposes,
then the exaction is properly called a tax.Police power and the power of taxation are inherent
powers of the State. These powers are distinct andhave different tests for validity. Police
power is the power of the State to enact legislation that mayinterfere with personal liberty or
property in order to promote the general welfare, while the power of taxation is the power to
levy taxes to be used for public purpose. The main purpose of police power isthe regulation of a
behavior or conduct, while taxation is revenue generation. The "lawful subjects" and"lawful
means" tests are used to determine the validity of a law enacted under the police power.
Thepower of taxation, on the other hand, is circumscribed by inherent and constitutional
limitations.









G.R. No. L-18330 July 31, 1963
JOSE DE BORJA, petitioner-appellee,
vs.
VICENTE G. GELLA, ET AL., respondents-appellants.
David Guevara for petitioner-appellee.
Office of the Solicitor General for respondent-appellant Treasurer of the Philippines.
Assistant City Fiscal H. A. Avendano for respondent-appellant Treasurer of Pasay City.
BAUTISTA ANGELO, J .:
Jose de Borja has been delinquent in the payment of his real estate taxes since 1958 for
properties located in the City of Manila and Pasay City and has offered to pay them with two
negotiable, certificates of indebtedness Nos. 3064 and 3065 in the amounts of P793.40 and
P717.69, respectively. Borja was, however, a mere assignee of the aforesaid negotiable
certificates, the applicants for backpay rights covered by them being respectively Rafael Vizcaya
and Pablo Batario Luna.
The offers to pay the estate taxes in question were rejected by the city treasurers of both Manila
and Pasay cities on the ground of their limited negotiability under Section 2, Republic Act No.
304, as amended by Republic Act 800, and in the case of the city treasurer of Manila on the
further ground that he was ordered not to accept them by the city mayor, for which reason Borja
was prompted to bring the question to the Treasurer of the Philippines who opined, among
others, that the negotiable certificates cannot be accepted as payment of real estate taxes
inasmuch as the law provides for their acceptance from their backpay holder only or the original
applicant himself, but not his assignee. In his letter of April 29, 1960 to the Treasurer of the
Philippines, however, Borja entertained hope that the certificates would be accepted for payment
in view of the fact that they are already long past due and redeemable, but his hope was
frustrated. So on June 30, 1960, Borja filed an action against the treasurers of both the City of
Manila and Pasay City, as well as the Treasurer of the Philippines, to impel them to execute an
act which the law allegedly requires them to perform, to wit: to accept the above-mentioned
certificates of indebtedness considering that they were already due and redeemable so as not to
deprive him illegally of his privilege to pay his obligation to the government thru such means.
Respondents in due time filed their answer setting up the reasons for their refusal to accept the
certificates, and after the requisite trial was held, the court a quo rendered judgment the
dispositive part of which reads:
WHEREFORE, the treasurers of the City of Manila and Pasay City, their agents and
other persons acting in their behalf are hereby enjoined from including petitioner's
properties in the payment of real estate, taxes, and to sell them at public auction and
respondent Treasurer of the Philippines, and the treasurers of the City of Manila and
Pasay City are hereby ordered to accept petitioner's Negotiable Certificates of
Indebtedness Nos. 3064 and 3065 in the sums of P793.40 and P717.39 in payment of
real estate taxes of his properties in the City of Manila and Pasay City, respectively,
without costs.
Respondents took this appeal on purely questions of law.1wph 1. t
Reduced to bare essentials, the 12 errors assigned by appellants may be boiled down to the
following: (a) has appellee the right to apply to the payment of his real estate taxes to the
government of Manila and Pasay cities the certificates of indebtedness he holds while appellants
have the correlative legal duty to accept the certificates in payment of said taxes?; (b) can
compensation be invoked to extinguish appellee's real estate tax liability between the latter's
obligation and the credit represented by said certificates of indebtedness?
Anent the first issue, the pertinent legal provision to be reckoned with is Section 2 of Republic Act
No. 304, as amended by Republic Act No. 800, which in part reads:
SEC. 2. The Treasurer of the Philippines shall, upon application, and within one year
from the approval of this Act, and under such rules and regulations as may be
promulgated by the Secretary of Finance, acknowledge and file requests for the
recognition of the right to the salaries and wages as provided in section one hereof, and
notice of such acknowledgment shall be issued to the applicant which shall state the total
amount of such salaries or wages due to the applicant, and certify that it shall be
redeemed by the Government of the Philippines within ten years from the date of their
issuance without interest: Provided, that upon application . . . a certificate of
indebtedness may be issued by the Treasurer of the Philippines covering the whole or
part of the total salaries or wages the right to which has been duly acknowledged and
recognized, provided that the face value of such certificate of indebtedness shall not
exceed the amount that the applicant may need for the payment of (1) obligations
subsisting at the time of the approval of this Act for which the applicant may directly be
liable to the Government or to any of its branches or instrumentalities, or the corporations
owned or controlled by the Government, or to any citizen of the Philippines, who may be
willing to accept the same for such settlement; (2) his taxes; . . . and Provided, also, That
any person who is not an alien, bank or other financial institution at least sixty per
centum of whose capital is owned by Filipinos may, notwithstanding any provision of its
charter, articles of incorporation, by-laws, or rules and regulations to the contrary, accept
or discount at not more than three and one-half per centum per annum for ten years a
negotiable certificate of indebtedness which shall be issued by the Treasurer of the
Philippines upon application by a holder of a back pay acknowledgment. . . . .
To begin with, it cannot be contended that appellants are in duty bound to accept the negotiable
certificates of indebtedness held by appellee in payment of his real estate taxes for the simple
reason that they were not obligations subsisting at the time of the approval of Republic Act No.
304 which took effect on June 18, 1948. It should be noted that the real estate taxes in question
have reference to those due in 1958 and subsequent years. The law is explicit that in order that a
certificate may be used in payment of an obligation the same must be subsisting at the time of its
approval even if we hold that a tax partakes of this character, neither can it be contended that
appellee can compel the government to accept the alleged certificates of indebtedness in
payment of his real estate taxes under proviso No. 2 abovequoted also for the reason that in
order that such payment may be allowed the tax must be owed by the applicant himself . This is
the correct implication that may be drawn from the use by the law of the words "his taxes". Verily,
the right to use the backpay certificate in settlement of taxes is given only to the applicant and
not to any holder of any negotiable certificate to whom the law only gives the right to have it
discounted by a Filipino citizen or corporation under certain limitations. Here appellee is not
himself the applicant of the certificate, in question. He is merely an assignee thereof, or a
subsequent holder whose right is at most to have it discounted upon maturity or to negotiate it
in the meantime. A fortiori, it may be included that, not having the right to use said certificates to
pay his taxes, appellee cannot compel appellants to accept them as he requests in the present
petition for mandamus. As a consequence, we cannot but hold that mandamus does not lie
against appellants because they have in no way neglected to perform an act enjoined upon them
by law as a duty, nor have they unlawfully excluded appellee from the use or enjoyment of a right
to which be is entitled.
1

We are aware of the cases
2
cited by the court a quo wherein the government banking institutions
were ordered to accept the backpay certificates of petitioners in payment of their indebtedness to
them, but they are not here in point because in the cases mentioned the petitioners were
applicants and original holders of the corresponding backpay certificates. Here appellee is not.
With regard to the second issue, i.e., whether compensation can be invoked insofar as the two
obligations are concerned, Articles 1278 and 1279 of the new Civil Code provide:
ART. 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other.
ART. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they
be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they two liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.
It is clear from the above legal provisions that compensation cannot be effected with regard to
the two obligations in question. In the first place, the debtor insofar as the certificates of
indebtedness are concerned is the Republic of the Philippines, whereas the real estate taxes
owed by appellee are due to the City of Manila and Pasay City, each one of which having a
distinct and separate personality from our Republic. With regard to the certificates, the creditor is
the appellee while the debtor is the Republic of the Philippines. And with regard to the taxes, the
creditors are the City of Manila and Pasay City while the debtor is the appellee. It appears,
therefore, that each one of the obligors concerning the two obligations is not at the same time the
principal creditor of the other. It cannot also be said for certain that the certificates are already
due. Although on their faces the certificates issued to appellee state that they are redeemable on
June 18, 1958, yet the law does not say that they are redeemable from its approval on June 18,
1948 but "within ten years from the date of issuance" of the certificates. There is no certainty,
therefore, when the certificates are really redeemable within the meaning of the law. Since the
requisites for the accomplishment of legal compensation cannot be fulfilled, the latter cannot take
place with regard to the two obligations as found by the court a quo.
WHEREFORE, the decision appealed from is reversed. The petition for mandamus is dismissed.
The injunction issued against respondents-appellants is hereby lifted. No costs
Luzon Stevedoring Corp. vs. Court of Tax Appeals
GR L-30232, 29 July 1988
Second Division, Paras (J): 4 concur
Facts: Luzon Stevedoring Corp. imported various engine parts and other equipment for tugboat
repair and
maintenance in 1961 and 1962. It paid the assessed compensation tax under protest. Unable to
secure a tax
refund from the Commissioner (for the amount of P33,442.13), it filed a petition for review with the
Court of
Tax Appeals (CTA). The CTA denied the petition, as well as the motion for reconsideration filed
thereafter.
Issue: Whether the corporation is exempt from the compensation tax.
Held: As the power of taxation is a high prerogative of sovereignty, the relinquishment of such is
never
presumed and any reduction or dimunition thereof with respect to its mode or its rate, must be
strictly


TaPBCom. vs. CIR(GR 112024. Jan. 28, 1999)
Posted by taxcasesdigest on Tuesday, July 7, 2009
Labels: 2-year, administrative issuance, reglementary period, tax credit, tax refund
FACTS:

Petitioner, Philippine Bank of Communications (PBCom), a commercial banking corporation duly
organized under Philippine laws, filed its quarterly income tax returns for the first and second
quarters of 1985, reported profits, and paid the total income tax of P5,016,954.00 by applying
PBCom's tax credit memos for P3,401,701.00 and P1,615,253.00, respectively. Subsequently,
however, PBCom suffered net loss of P25,317,228.00, thereby showing no income tax liability in its
Annual Income Tax Returns for the year-ended December 31, 1985. For the succeeding year, ending
December 31, 1986, the petitioner likewise reported a net loss of P14,129,602.00, and thus declared
no tax payable for the year.
But during these two years, PBCom earned rental income from leased properties. The lessees
withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and
P234,077.69 in 1986. On August 7, 1987, petitioner requested the Commissioner of Internal
Revenue, among others, for a tax credit of P5,016,954.00 representing the overpayment of taxes in
the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their
lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted
a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The petition was
docketed as CTA Case No. 4309 entitled: "Philippine Bank of Communications vs. Commissioner of
Internal Revenue."
The CTA decided in favor of the BIR on the ground that the Petition was filed out of time as the same
was filed beyond the two-year reglementary period. A motion for Reconsideration was denied and
the appeal to Court of Appeals was likewise denied. Thus, this appeal to Supreme Court.

Issues:

a) Whether or not Revenue Regulations No. 7-85 which alters the reglementary period from two (2)
years to ten (10) years is valid.
b) Whether or not the petition for tax refund had already prescribed.

Ruling:

RR 7-85 altering the 2-year prescriptive period imposed by law to 10-year prescriptive period is
invalid.

Administrative issuances are merely interpretations and not expansions of the provisions of law,
thus, in case of inconsistency, the law prevails over them. Administrative agencies have no legislative
power.

When the Acting Commissioner of Internal Revenue issued RMC 7-85,
changing the prescriptive period of two years to ten years on claims of excess quarterly income tax
payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In
so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the
statute passed by Congress.

It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in
the sense of more specific and less general interpretations of tax laws) which are issued from time to
time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed
upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by
the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found
to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of
remaining consistent and in harmony with, the law they seek to apply and implement.

Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors
of its officials or agents. As pointed out by the respondent courts, the nullification of RMC No. 7-85
issued by the Acting Commissioner of Internal Revenue is an administrative interpretation which is
not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the express provision of a statute.
Hence, his interpretation could not be given weight for to do so would, in effect, amend the
statute.

By implication of the above, claim for refund had already prescribed.

Since the petition had been filed beyond the prescriptive period, the same has already prescribed.
The fact that the final adjusted return show an excess tax credit does not automatically entitle
taxpayer claim for refund without any express intent.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals appealed from is
AFFIRMED, with COSTS against the petitionerxation Law I, 2004 ( 1 )