142. MERALCO vs.

Savellano, 117 SCRA 804

Facts: In 1967, the late Juan G. Maniago submitted to the Commissioner confidential denunciation
against the Meralco Securities Corp. for tax evasion for not having paid income tax on 25% of the
dividends it received from the Manila Electric Co. for years 1962 to 1966. The Commissioner caused the
investigation of the denunciation and found that no deficiency corporate tax was due from Meralco
Securities. Maniago was informed of the findings. The Secretary of Finance sustained the
Commissioner’s action. Maniago filed a petition for mandamus against the Commissioner so as to
compel it to impose the alleged deficiency tax assessment against Meralco Securities and to award him
the corresponding informer’s award.

Issue: Whether the Commissioner may be compelled to impose the alleged deficiency tax assessment.

Ruling: NO. Mandamus only lies to enforce the performance of a ministerial act or duty and not to
control the performance of discretionary power. Mandamus may not be made against the
Commissioner to compel him to impose a tax assessment not found by him to be due or proper, for that
would be tantamount to a usurpation of executive functions. Purely administrative and discretionary
functions may not be interfered with by the Courts. The discretionary power vested in the proper
executive official, in the absence of arbitrariness or grave abuse so as to go beyond the statutory
authority, is not subject to the contrary judgment or control of others

143. Asia International Auctioneers vs. Parayno, 50 SCRA 536

Facts: Petitioner is a duly organized corporation operating within the Subic Special Economic Zone
(SSEZ). It is engaged in the importation of used motor vehicles and heavy equipment which it sells to the
public through auction. BIR assessed it with deficiency VAT and excise taxes. During the pendency of the
case, petitioner availed of the amnesty program under Republic Act No. 9480. The BIR argues that
petitioner is disqualified under Section 8(a) of RA 9480 from availing the Tax Amnesty Program because
it is “deemed” a withholding agent for the deficiency taxes. The BIR likewise argues that petitioner, as an
accredited investor/taxpayer situated at the SSEZ, should have availed of the tax amnesty granted under
RA 9399 and not under RA 9480.

Issue: Whether petitioner is entitled to the tax amnesty program.

Ruling: YES. Petitioner is not prohibited from availing tax amnesty under RA 9399. RA 9399 was passed
prior to the passage of RA 9480. RA 9399 does not preclude taxpayers within its coverage from availing
of other tax amnesty programs available or enacted in the future like RA 9480. RA 9480, on the other
hand, does not exclude from its coverage taxpayers operating within special economic zones. As long as
it is within the bounds of the law, a taxpayer has the liberty to choose which tax amnesty program it
wants to avail. The Court also took judicial notice of the "Certification of Qualification" issued by
Eduardo A. Baluyut, BIR Revenue District Officer, stating that AlA has availed and is qualified for Tax
Amnesty for the Taxable Year 2005 and Prior Years pursuant to RA 9480. In the absence of sufficient
evidence proving that the certification was issued in excess of authority, the presumption that it was
issued in the regular performance of the revenue district officer's official duty stands.
144. PBCom vs. CIR, 302 SCRA 241

Facts: Petitioner 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. Subsequently, however, PBCom suffered losses so that when it filed
its Annual Income Tax Returns for the year-ended December 31, 1985, it declared a net loss of
P25,317,228.00, thereby showing no income tax liability. 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.
Petitioner requested the CIR, 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, 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, petitioner instituted a Petition for Review on November 18,
1988 before the Court of Tax Appeals (CTA), which rendered a decision denying the request of petitioner
for a tax refund or credit on the ground that it was filed beyond the two-year reglementary period
provided for by law.

Issue: Whether the Court of Appeals erred in denying the plea for tax refund or tax credits on the
ground of prescription, despite petitioner’s reliance on RMC No. 7-85, changing the prescriptive period
of two years to ten years.

Ruling: NO. The rule states that the taxpayer may file a claim for refund or credit with the Commissioner
of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced.
The two-year prescriptive period provided, should be computed from the time of filing the Adjustment
Return and final payment of the tax for the year.

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.
145. BIR vs. Filinvest, 654 SCRA 56

Facts: The owner of 80% of the outstanding shares of respondent Filinvest Alabang, Inc. (FAI),
respondent Filinvest Development Corporation (FDC) is a holding company which also owned
outstanding shares of Filinvest Land, Inc. (FLI). Both transferred in favor of the latter parcels of land
intended to facilitate development of medium-rise residential and commercial buildings, and in
exchange, shares of stock of FLI were issued to FDC and FAI. As a result of the exchange, FLI’s ownership
structure was changed.

FDC received from the BIR a Formal Notice of Demand to pay deficiency income and documentary stamp
taxes, plus interests and compromise penalties. The deficiency taxes were assessed on the taxable gain
supposedly realized by FDC from the Deed of Exchange it executed with FAI and FLI, on the dilution
resulting from the Shareholders’ Agreement FDC executed with RHPL as well as the "arm’s-length"
interest rate and documentary stamp taxes imposable on the advances FDC extended to its affiliates. FAI
similarly received from the BIR a Formal Letter of Demand for deficiency income taxes. Within the
reglementary period of thirty (30) days from notice of the assessment, both FDC and FAI filed their
respective requests for reconsideration/protest, on the ground that the deficiency income and
documentary stamp taxes assessed by the BIR were bereft of factual and legal basis.

In view of the failure of petitioner Commissioner of Internal Revenue (CIR) to resolve their request for
reconsideration/protest within the aforesaid period, FDC and FAI filed a petition for review with the
Court of Tax Appeals (CTA), which rendered a decision that with the exception of the deficiency income
tax on the interest income FDC supposedly realized from the advances it extended in favor of its
affiliates, cancelled the rest of deficiency income and documentary stamp taxes assessed against FDC
and FAI for the years 1996 and 1997.

Issue: Whether the letters of instruction or cash vouchers extended by FDC to its affiliates are not
deemed loan agreements subject to DST under Section 180 of the NIRC.

Ruling: YES. In cases where no formal agreements or promissory notes have been executed to cover
credit facilities, the documentary stamp tax shall be based on the amount of drawings or availment of
the facilities, which may be evidenced by credit/debit memo, advice or drawings by any form of check or
withdrawal slip, under Section 180 of the Tax Code.

Applying the aforesaid provisions to the case at bench, we find that the instructional letters as well as
the journal and cash vouchers evidencing the advances FDC extended to its affiliates in 1996 and 1997
qualified as loan agreements upon which documentary stamp taxes may be imposed. In keeping with
the caveat attendant to every BIR Ruling to the effect that it is valid only if the facts claimed by the
taxpayer are correct, we find that the CA reversibly erred in utilizing BIR Ruling No. 116-98, dated 30 July
1998 which, strictly speaking, could be invoked only by ASB Development Corporation, the taxpayer who
sought the same.

Accordingly, Assessment Notices Nos. SP-DST-96-00020-2000 and SP-DST-97-00021-2000 issued for

Facts: In implementing Section 4(b) of the Tax Code, the Commissioner issued General Circular V-334.
Pursuant thereto, ABS-CBN Broadcasting Corp. dutifully withheld and turned over to the BIR 30% of ½ of
the film rentals paid by it to foreign corporations not engaged in trade or business in the Philippines. The
last year that the company withheld taxes pursuant to the Circular was in 1968. On 27 June 1908, RA
5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30% to 35% and revising the
tax basis from “such amount” referring to rents, etc. to “gross income.” In 1971, the Commissioner
issued a letter of assessment and demand for deficiency withholding income tax for years 1965 to 1968.
The company requested for reconsideration; where the Commissioner did not act upon.

Issue: Whether Revenue Memorandum Circular 4-71, revoking General Circular V-334, may be
retroactively applied.

Ruling: Rulings or circulars promulgated by the Commissioner have no retroactive application where to
so apply them would be prejudicial to taxpayers. Herein, the prejudice the company of the retroactive
application of Memorandum Circular 4-71 is beyond question. The company was no longer in a position
to withhold taxes due from foreign corporations because it had already remitted all film rentals and had
no longer control over them when the new circular was issued. Insofar as the enumerated exceptions
are concerned, the company does not fall under any of them.

147. CIR vs. CA, 267 SCRA 557

Facts: Alhambra Industries, Inc. is a domestic corporation engaged in the manufacture and sale of cigar
and cigarette products. On 7 May 1991 private respondent received a letter dated 26 April 1991 from
the Commissioner of Internal Revenue assessing it deficiency Ad Valorem Tax (AVT) in the amount P
488,396.62. Private respondent filed a protest against the proposed assessment with a request that the
same be withdrawn and cancelled. Petitioner denied such protest. The dispute arose from the
discrepancy in the taxable base on which the excise tax is to apply on account of two incongruous BIR
Rulings: (1) BIR Ruling 473-88 dated 4 October 1988 which excluded the VAT from the tax base in
computing the fifteen percent (15%) excise tax due; and, (2) BIR Ruling 017-91 dated 11 February 1991
which included back the VAT in computing the tax base for purposes of the fifteen percent (15%) ad
valorem tax.

Issue: Whether Sec. 142 (d) of the Tax Code, which provides for the inclusion of the VAT in the tax base
for purposes of computing the 15% ad valorem tax, is the applicable law in the instant case as it
specifically applies to the manufacturer's wholesale price of cigar and cigarette products and not Sec.
127 (b) of the Tax Code which applies in general to the wholesale of goods or domestic products.

Ruling: Sec. 142 being a specific provision applicable to cigar and cigarettes must prevail over Sec. 127
(b), a general provision of law insofar as the imposition of the ad valorem tax on cigar and cigarettes is
concerned. Consequently, the application of Sec. 127 (b) to the wholesale price of cigar and cigarette
products for purposes of computing the ad valorem tax is patently erroneous. Accordingly, BIR Ruling
473-88 is void ab initio as it contravenes the express provisions of Sec. 142 (d) of the Tax Code.

However, well-entrenched is the rule that rulings and circulars, rules and regulations promulgated by
the Commissioner of Internal Revenue would have no retroactive application if to so apply them would
be prejudicial to the taxpayers. The BIR is now ordered to refund private respondent of the collected
taxes form the latter.

148. Roman Catholic Archbishop of Manila vs. CA, G.R. No. 111324, July 5, 1996

Facts: The case at bar springs from a lease agreement executed by petitioner-lessor, the Roman Catholic
Archbishop of Manila, and private respondent-lessees, spouses Ernesto and Lorna Reyes over a parcel of
land located in Intramuros, Manila. The lease contract provided for a ten-year lease, renewable for
another ten years at the option of the lessor and private respondent lessees were also given the right of
pre-emption, with first priority to purchase the property if the owner, herein petitioner, offered it for
sale.

Intending to have a fire wall constructed, private respondents allegedly had the property relocated. As a
result, they discovered that the adjacent owner's concrete fence abutted on an encroached upon 30.96
square meters of the leased property. Private respondents requested petitioner to make adjustments in
order to correct the encroachment problem. The spouses Reyes claim that despite repeated follow-up,
petitioner has failed to take any action on their demand. Consequently, they decided to withhold rental
payments as "leverage" against petitioner and to force the latter to make corrections or adjustments in
the area of subject land.

Petitioner informed private respondents in a letter of its intention to sell the leased property. Although
the Reyeses conveyed their interest in buying the property, no deal was finalized. Private respondent
spouses filed an action for specific performance and damages before the Regional Trial Court of Manila.
The correction of adjustment of the encroached portion of the property constituted their first cause of
action. For their second cause of action, the spouses Reyes prayed that petitioner be compelled to sell
the leased premises to them at P1,600.00 per square meter, claiming that there was already a contract
of sale between the parties.

The trial court issued an Order denying petitioner's (defendant below) motion to dismiss insofar as the
first cause of action is concerned but granted it for the second cause of action. Private respondent
spouses filed a notice of appeal and elevated the case to the Court of Appeals. Petitioner moved to
dismiss the appeal on the ground that the case raises only pure questions of law and the respondent
appellate court had no jurisdiction over the same. The latter court denied petitioner's motion to dismiss
and motion for reconsideration and ruled that private respondent spouses, appellants below, raised
factual issues on the offer and acceptance regarding the sale of the lot in question and on the trial
court's order to pay back rentals.

Issue/s: Whether the issues raised on appeal to respondent court are pure questions of law over which
the Supreme Court has exclusive jurisdiction.

Ruling: YES. The provision of law states the general rule that appeals from the Regional Trial Courts shall
be brought before the Court of Appeals unless it is properly to be elevated to the Supreme Court in
accordance with (a) constitutional provisions, (b) B.P. Blg. 129 and (c) the provisions of the Judiciary Act
of 1948.
From the foregoing, it is clear that the Court of Appeals does not exercise jurisdiction over appeals from
the Regional Trial Court which raise purely questions of law. Appeals of this nature should be elevated to
this Court. Notwithstanding the confirmation of this legal rule, still, the instant petition cannot be
granted because the appeal brought before the Court of Appeals by private respondent spouses does
not involve questions or errors of law alone, there being factual issues to be resolved.
Petitioner has correctly defined what is a "question of law," thus: there is a question of law when the
issue does not call for an examination of the probative value of evidence presented, the truth or
falsehood of facts being admitted and the doubt concerns the correct application of law and
jurisprudence on the matter. The question that begs answer is whether the issues raised by the private
respondent spouses are solely questions of law which would, therefore, appertain to the exclusive
jurisdiction of this Court.

149. CIR vs. Phil. Health Providence, 522 SCRA 131

Facts: The Philippine Health Care Providers, Inc., herein respondent, is a corporation organized and
existing under the laws of the Republic of the Philippines. President Corazon C. Aquino issued Executive
Order (E.O.) No. 273, amending the National Internal Revenue Code of 1977 (Presidential Decree No.
1158) by imposing Value-Added Tax (VAT) on the sale of goods and services. Meanwhile, Republic Act
(R.A.) No. 7716 (Expanded VAT or E-VAT Law) took effect, amending further the National Internal
Revenue Code of 1977. Then on January 1, 1998, R.A. No. 8424 (National Internal Revenue Code of
1997) became effective. This new Tax Code substantially adopted and reproduced the provisions of E.O.
No. 273 on VAT and R.A. No. 7716 on E-VAT.

In the interim, the BIR sent respondent a Preliminary Assessment Notice for deficiency in its payment of
the VAT and documentary stamp taxes (DST) for taxable years 1996 and 1997. Respondent filed a
protest with the BIR. CIR sent respondent a letter demanding payment of "deficiency VAT" and DST for
taxable years 1996 and 1997. Respondent filed another protest questioning the assessment notices. CIR
did not take any action on respondent's protests. Hence, respondent filed with the Court of Tax Appeals
(CTA) a petition for review, which rendered a decision, that the petitioner is a service contractor subject
to VAT since it does not actually render medical service but merely acts as a conduit between the
members and petitioner's accredited and recognized hospitals and clinics.

Issue: Whether VAT Ruling No. 231-88 exempting respondent from payment of VAT has retroactive
application.

Ruling: Section 246 of the 1997 Tax Code, as amended, provides that rulings, circulars, rules and
regulations promulgated by the Commissioner of Internal Revenue have no retroactive application if to
apply them would prejudice the taxpayer. The exceptions to this rule are: (1) where the taxpayer
deliberately misstates or omits material facts from his return or in any document required of him by the
Bureau of Internal Revenue; (2) where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling is based, or (3) where the taxpayer
acted in bad faith.

The Supreme Court agree with both the Tax Court and the Court of Appeals that respondent acted in
good faith. According to the Court of Appeals, respondent's failure to describe itself as a "health
maintenance organization," which is subject to VAT, is not tantamount to bad faith. We note that the
term "health maintenance organization" was first recorded in the Philippine statute books only upon the
passage of "The National Health Insurance Act of 1995" (Republic Act No. 7875). Section 4 (o) (3) thereof
defines a health maintenance organization as "an entity that provides, offers, or arranges for coverage
of designated health services needed by plan members for a fixed prepaid premium." Under this law, a
health maintenance organization is one of the classes of a "health care provider."

150. CIR vs CA, 240 SCRA 368

Facts: On 22 August 1986, E.O. 41 was promulgated declaring a one-time tax amnesty on unpaid income
taxes, later amended to include estate and donor's taxes and taxes on business, for the taxable years
1981 to 1985.

Availing itself of the amnesty, respondent R.O.H. Auto Products Philippines, Inc., filed, in October 1986
and November 1986, its Tax Amnesty Return and Supplemental Tax Amnesty Return, respectively, and
paid the corresponding amnesty taxes due. Prior to this availment, petitioner Commissioner of Internal
Revenue, in a communication received by private respondent on 13 August 1986, assessed the latter
deficiency income and business taxes for its fiscal years ended 30 September 1981 and 30 September
1982 in an aggregate amount of P1,410,157.71. The taxpayer wrote back to state that since it had been
able to avail itself of the tax amnesty, the deficiency tax notice should forthwith be cancelled and
withdrawn. The request was denied by the Commissioner, on the ground that Revenue Memorandum
Order 4-87, implementing E.O. 41, had construed the amnesty coverage to include only assessments
issued by the Bureau of Internal Revenue after the promulgation of the executive order on 22 August
1986 and not to assessments theretofore made.

Issue: Whether or not the position taken by the Commissioner coincides with the meaning and intent of
E.O. 41.

Ruling: The Supreme Court agree with both the Court of Appeals and Court of Tax Appeals that
Executive Order No. 41 is quite explicit and requires hardly anything beyond a simple application of its
provisions. If, as the Commissioner argues, Executive Order No. 41 had not been intended to include
1981–1985 tax liabilities already assessed (administratively) prior to 22 August 1986, the law could have
simply so provided in its exclusionary clauses. lt did not. The conclusion is unavoidable, and it is that the
executive order has been designed to be in the nature of a general grant of tax amnesty subject only to
the cases specifically excepted by it.

The authority of the Minister of Finance (now the Secretary of Finance), in conjunction with the
Commissioner of Internal Revenue, to promulgate all needful rules and regulations for the effective
enforcement of internal revenue laws cannot be controverted. Neither can it be disputed that such rules
and regulations, as well as administrative opinions and rulings, ordinarily should deserve weight and
respect by the courts. Much more fundamental than either of the above, however, is that all such
issuances must not override, but must remain consistent and in harmony with, the law they seek to
apply and implement. Administrative rules and regulations are intended to carry out, neither to supplant
nor to modify, the law.