6. CHINA BANKING CORPORATION v. THE COMMISSIONER OF INTERNAL REVENUE. G.R. No. 172359.

October 2, 2009

FACTS:
Petitioner, a universal banking corporation, was engaged in the transaction of accepting special savings
deposits (SSD), otherwise known as Savings Plus Deposit.
On 1999, petitioner received a Pre-Assessment Notice issued by the CIR for deficiency documentary
stamp tax on SSDs for the taxable years 1994 and 1995. Subsequently, petitioner received a Final
Assessment Notice.
Petitioner filed a formal protest questioning the legality and basis of both the PAN and the FAN.
Petitioner argued that SSDs are not liable for documentary stamp tax because by the very nature of the
transaction which is just a variation of the regular savings account, it is not taxable under Section 180 of
the NIRC.
Petitioner filed a petition with the CIR. The CIR affirmed the assessments for deficiency documentary
stamp on the SSDs covering the taxable years 1994 to 1997.
Petitioners then appealed to the CTA, in which the CTA upheld the deficiency documentary stamp tax on
the SSDs.

ISSUE: Whether Special Savings Deposits are subject to documentary stamp tax.

RULING:
No. Section 180 of the NIRC, a documentary stamp tax shall be collected on certificates of deposits
drawing interest. The CTA held that petitioners SSDs fall under the category of certificates of deposit
drawing interest.
In Far East Bank and Trust Company v. Querimit, the Court defined a certificate of deposit as a written
acknowledgment by a bank or banker of the receipt of a sum of money on deposit which the bank or
banker promises to pay to the depositor, to the order of the depositor, or to some other person or his
order, whereby the relation of debtor and creditor between the bank and the depositor is created.
In the case of Philippine Banking Corporation v. Commissioner of Internal Revenue, the Court ruled that
Special/Super Savings Deposit Account (SSDA) has all the distinct features of a certificate of deposit.
In International Exchange Bank v. Commissioner of Internal Revenue, this Court held that a Savings
Account-Fixed Savings Deposit is likewise subject to documentary stamp tax.
In this case, petitioners version of the special savings deposit is called the Savings Plus Deposit Accounts.
Petitioners Savings Plus Deposit is essentially the same as the Savings Account-Fixed Savings Deposit in
International, as well as the Special/Super Savings Account in PBC wherein this Court ruled that said
accounts are subject to documentary stamp tax. The three accounts have the same features:
Amount deposited is withdrawable anytime,
The same is evidenced by a passbook,
The rate of interest offered is the prevailing market rate, provided the depositor would maintain his
minimum balance in thirty (30) days at the minimum, and should he withdraw before the period, his
deposit would earn the regular savings deposit rate.

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7. REYES v. ALMANZOR
GR Nos. L-49839-46, April 26, 1991
196 SCRA 322

CASE DIGEST

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and occupied as
dwelling
units by tenants who were paying monthly rentals of not exceeding P300. Sometimes in 1971 the Rental
Freezing Law was passed prohibiting for one year from its effectivity, an increase in monthly rentals of
dwelling
units where rentals do not exceed three hundred pesos (P300.00), so that the Reyeses were precluded
from
raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of Manila re-classified
and
reassessed the value of the subject properties based on the schedule of market values, which entailed
an
increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement
averring
that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and
unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income derived from their
properties. They argued that the income approach should have been used in determining the land values
instead
of the comparable sales approach which the City Assessor adopted.
ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?
HELD: No. The taxing power has the authority to make a reasonable and natural classification for
purposes of
taxation but the government's act must not be prompted by a spirit of hostility, or at the very least
discrimination
that finds no support in reason. It suffices then that the laws operate equally and uniformly on all
persons under
similar circumstances or that all persons must be treated in the same manner, the conditions not being
different
both in the privileges conferred and the liabilities imposed.
Consequently, it stands to reason that petitioners who are burdened by the government by its Rental
Freezing
Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized
by the
same government by the imposition of excessive taxes petitioners can ill afford and eventually result in
the
forfeiture of their properties.

______________

8. Philippine Health Care Providers v CIR G.R. No. 167330 June 12, 2008
J. Corona

DECISION WAS REVERSED AFTER A MOTION FOR RECONSIDERATION. RESOLUTION ON SEPT. 18, 2009
(600 SCRA 413)
Facts:

The petitioner, a prepaid health-care organization offering benefits to its members. The CIR found that
the organization had a deficiency in the payment of the DST under Section 185 of the 1997 Tax Code
which stipulated its implementation:
On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or
liability made or renewed by any person, association or company or corporation transacting the business
of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler,
or other branch of insurance (except life, marine, inland, and fire insurance)
The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest, for 1996-
1997 in the total amount of P224,702,641.18.
The petitioner protested to the CIR, but it didnt act on the appeal. Hence, the company had to go to the
CTA. The latter declared judgment against them and reduced the taxes. It ordered them to pay 22 million
pesos for deficiency VAT for 1997 and 31 million deficiency VAT for 1996.
CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to 1997.
Issues: WON a health care agreement in the nature of an insurance contract and therefore subject to the
documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)
Held: Yes. Petition dismissed.
Ratio:
The DST is levied on the exercise by persons of certain privileges conferred by law for the creation,
revision, or termination of specific legal relationships through the execution of specific instruments.
The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the transaction
of the business. In particular, the DST under Section 185 of the 1997 Tax Code is imposed on the privilege
of making or renewing any policy of insurance (except life, marine, inland and fire insurance), bond or
obligation in the nature of indemnity for loss, damage, or liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue
Cross Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a non-
life insurance policy.
Its health care agreement is not a contract for the provision of medical services. Petitioner does not
actually provide medical or hospital services but merely arranges for the same
It is also incorrect to say that the health care agreement is not based on loss or damage because, under
the said agreement, petitioner assumes the liability and indemnifies its member for hospital, medical
and related expenses (such as professional fees of physicians). The term "loss or damage"is broad
enough to cover the monetary expense or liability a member will incur in case of illness or injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity.
Similarly, the insurable interest of every member of petitioner's health care program in obtaining the
health care agreement is his own health. Under the agreement, petitioner is bound to indemnify any
member who incurs hospital, medical or any other expense arising from sickness, injury or other
stipulated contingency to the extent agreed upon under the contract.

____________

9. National Power Corporation vs City of Cabanatuan

G.R. No. 149110 April 9, 2003

NATIONAL POWER CORPORATION, petitioner,

vs.
CITY OF CABANATUAN, respondent.

FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act
No. 120, as amended.

For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross
income of P107,814,187.96 in 1992.7 Pursuant to section 37 of Ordinance No. 165-92,8 the respondent
assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter’s
gross receipts for the preceding year.

Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax
on government entities. Petitioner also contended that as a non-profit organization, it is exempted from
the payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No.
6395, as amended.

The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due,
plus surcharge. Respondent alleged that petitioner’s exemption from local taxes has been repealed by
section 193 of the LGC, which reads as follows:

“Sec. 193. Withdrawal of Tax Exemption Privileges.- Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code.”

RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground that
section 193, in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted
to the petitioner.

ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and
impose an annual tax on “businesses enjoying a franchise

HELD: YES. Taxes are the lifeblood of the government, for without taxes, the government can neither
exist nor endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from
the very existence of the state whose social contract with its citizens obliges it to promote public interest
and common good. The theory behind the exercise of the power to tax emanates from necessity;32
without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of
the people.

Section 137 of the LGC clearly states that the LGUs can impose franchise tax “notwithstanding any
exemption granted by any law or other special law.” This particular provision of the LGC does not admit
any exception. In City Government of San Pablo, Laguna v. Reyes,74 MERALCO’s exemption from the
payment of franchise taxes was brought as an issue before this Court. The same issue was involved in the
subsequent case of Manila Electric Company v. Province of Laguna.75 Ruling in favor of the local
government in both instances, we ruled that the franchise tax in question is imposable despite any
exemption enjoyed by MERALCO under special laws, viz:

“It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support
their position that MERALCO’s tax exemption has been withdrawn. The explicit language of section 137
which authorizes the province to impose franchise tax ‘notwithstanding any exemption granted by any
law or other special law’ is all-encompassing and clear. The franchise tax is imposable despite any
exemption enjoyed under special laws.

Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless
otherwise provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all
persons, whether natural or juridical, including government-owned or controlled corporations except (1)
local water districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit
hospitals and educational institutions, are withdrawn upon the effectivity of this code, the obvious
import is to limit the exemptions to the three enumerated entities. It is a basic precept of statutory
construction that the express mention of one person, thing, act, or consequence excludes all others as
expressed in the familiar maxim expressio unius est exclusio alterius. In the absence of any provision of
the Code to the contrary, and we find no other provision in point, any existing tax exemption or incentive
enjoyed by MERALCO under existing law was clearly intended to be withdrawn.

Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local
government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual
receipts for the preceding calendar based on the incoming receipts realized within its territorial
jurisdiction. The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is
clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such
exemption subject only to the exceptions enumerated. Since it would be not only tedious and impractical
to attempt to enumerate all the existing statutes providing for special tax exemptions or privileges, the
LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more
unequivocal language could have been used.”76 (emphases supplied)

Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and
support myriad activities of the local government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the
people. As this Court observed in the Mactan case, “the original reasons for the withdrawal of tax
exemption privileges granted to government-owned or controlled corporations and all other units of
government were that such privilege resulted in serious tax base erosion and distortions in the tax
treatment of similarly situated enterprises.” With the added burden of devolution, it is even more
imperative for government entities to share in the requirements of development, fiscal or otherwise, by
paying taxes or other charges due from them.

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10. Phil. Bank of Communications vs. CIR

PHIL. BANK OF COMMUNICATIONS v. CIR

GR No. 112024, January 28, 1999

302 SCRA 250

FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid
income

taxes amounting to P5.2M in 1985. However, at the end of the year PBCom suffered losses so that when
it filed

its Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a
net

loss of P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from CIR for
a tax

credit and tax refunds representing overpayment of taxes. Pending investigation of the respondent CIR,

petitioner instituted a Petition for Review before the Court of Tax Appeals (CTA). CTA denied its petition
for tax

credit and refund for failing to file within the prescriptive period to which the petitioner belies arguing
the

Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaid taxes are not covered by
the

two-year prescriptive period mandated under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid exemption to the NIRC?

HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-
year

prescriptive period set by law.

Basic is the principle that "taxes are the lifeblood of the nation." The primary purpose is to generate
funds for

the State to finance the needs of the citizenry and to advance the common weal. Due process of law
under the

Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is
upon
taxation that the government chiefly relies to obtain the means to carry on its operations and it is of
utmost

importance that the modes adopted to enforce the collection of taxes levied should be summary and
interfered

with as little as possible.

From the same perspective, claims for refund or tax credit should be exercised within the time fixed by
law

because the BIR being an administrative body enforced to collect taxes, its functions should not be
unduly

delayed or hampered by incidental matters.