Taxation I

PART I.
GENERAL PRINCIPLES AND LIMITATIONS ON THE POWER OF TAXATION

CHAPTER I
GENERAL PRINCIPLES

Definition of Taxation
1. Paseo Realty & Development Corporation v. CA, G.R. No. 119286, October 13,
2004

Nature of the Power of Taxation

2. Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667
(1996)
3. Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan, Leyte, 69 SCRA
460 (1976) – p. 2
4. Philippine Petroleum Corporation v. Mun. of Pililla, 198 SCRA 82 (1991)
5. Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan, Leyte, 69 SCRA
460 (1976) – p. 3
6. Camarines Norte Electric Cooperative v. Torres, G.R. No. 127249, February
27, 1998
7. Hon. Exec. Secretary v. Southwing Heavy Industries, et al., G.R. No. 164171,
February 20, 2006
8. Cervantes v. Auditor General, 91 Phil. 359 (1952)
9. Maceda v. Macaraig, 197 SCRA 771 (1991)
10. Abakada Guro Party List v. Ermita, G.R. No. 168056, September 1,
2005
11. Soriano v. Secretary of Finance, G.R. No. 184450, January 24, 2017
12. Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan, Leyte, 69
SCRA 460 (1976) – p. 5
13. NPC v. Albay, 186 SCRA 198 (1990)

Aspects of Taxation
14. Abakada Guro Party List v. Ermita, G.R. No. 168056, September 1,
2005

Theory or Underlying Basis of Taxation

15. CIR v. Algue, Inc., 158 SCRA 9 (1988)
16. CIR v. Bank of the Philippine Islands, 521 SCRA 373 (2007)
17. Valley Trading Co. v. Court of First Instance, G.R. No. L-49529, March
31, 1989

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 18. CIR v. Algue, 158 SCRA 9 – p. 9 par. 1
19. CIR v. Algue, 158 SCRA 9 – p. 9 par. 3
20. CIR v. Algue, 158 SCRA 9 – p. 9 par. 4

The Power to Tax Involves the Power to Destroy

21. McCulloch v. Maryland, US 4 Wheat. 316
22. Roxas v. Court of Tax Appeals, 23 SCRA 276 (1968)

Definition of Taxes
23. Republic v. Philippine Rabbit Bus Lines, Inc., 32 SCRA 211 (1970)

Attributes or Characteristics of Taxes

24. Panay Electric Co. v. Collector of Internal Revenue, G.R. No. L-10574,
May 28, 1958
25. Borja v. Gella, 8 SCRA 602 (1963)
26. Air Canada v. CIR, 778 SCRA 131 (2016)
27. Vera v. Fernandez, 89 SCRA 199 (1979)
28. Republic v. Patanao, 20 SCRA 712 (1967)
29. Sunio v. NLRC, 127 SCRA 399 (1984) – p. 13
30. Republic v. COCOFED et al., G.R. Nos. 147062-64, December 14, 2001
31. Sunio v. NLRC, 127 SCRA 399 (1984) – p. 14
32. Tan Tiong Bio v. CIR, 4 SCRA 986 (1962)
33. Maceda v. Macaraig, 222 SCRA 217 (1991)

Characteristics of a Sound Tax System

34. Chavez v. Ongpin, G.R. No. 76778, June 6, 1990

Purposes and Objectives of Taxation

35. Caltex Philippines, Inc. v. Commission on Audit, 208 SCRA 726 (1992)
36. Balacuit v. CFI of Agusan del Norte, 163 SCRA 182 (1988)
37. Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, August 15, 1988
38. Morcoin Co. Ltd. v. City of Manila, et al., G.R. No. L-15351, January 28,
1961
39. Manila Memorial Park, Inc. v. Department of Social Welfare and
Development, 711 SCRA 302 (2013)
40. Lutz v. Araneta, 98 Phil. 148 (1966)

Taxes Distinguished from Other Impositions

A. Taxation Distinguished from Eminent Domain and Police Power
41. Edu v. Ericta, 35 SCRA 481 (1970)
42. Lim v. Pacquing, 240 SCRA 649 (1995)
43. Lutz v. Araneta, 98 Phil. 148 (1966)

2
 44. Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, August 15, 1988
45. Quezon City v. Ericta, 122 SCRA 759 (1983)
46. Velasco v. Villegas, 120 SCRA 568 (1983)
47. Ortigas & Co., Limited Partnership v. Feati Bank and Trust Co., 94
SCRA 593 (1979)
48. Sangalang v. Intermediate Appellate Court, G.R. No. 71169, December
22, 1988 – par. 3
49. Balacuit v. CFI of Agusan del Norte, 163 SCRA 182 (1998)
50. Sangalang v. Intermediate Appellate Court, G.R. No. 71169, December
22, 1988 – par. 5
51. Betoy v. National Power Corporation, G.R. Nos. 156556-57, October 4,
2011
52. Francia v. Intermediate Appellate Court, G.R. No. 76749, June 28, 1988

B. Tax v. Debt

C. Tax v. Toll
53. Diaz v. Secretary of Finance, G.R. No. 193007, July 19 2011

D. Tax v. License Fee

54. Bentley Gray Drug Goods Co. v. City of Tampa, 137 Gla. 641, 188 SO.
758
55. Victorias Milling Co. v. Mun. of Victorias, Prov. of Negros Occidental,
G.R. No. L-21183, September 27, 1968
56. Progressive Development Corp. v. Quezon City, G.R. No. L-36081, April
24, 1989
57. Land Transportation Office v. City of Butuan, G.R. No. 131512, January
20, 2000
58. Planters Products v. Fertiphil Corporation G.R. No. 166006, March 14,
2008

E. Tax v. Penalty

Double Taxation
59. Villanueva v. City of Iloilo, 26 SCRA 578 (1968) – p. 26
60. Serafica v. City Treasurer of Ormoc, G.R. No. L-24813, April 28, 1968
61. CIR v. Hawaiian-Philippine Co., 11 SCRA 256 (1964)
62. Compañ ia General de Tabacos de Filipinas v. City of Manila, 8 SCRA
367 (1963) – p. 26
63. San Miguel Brewery, Inc. v. City of Cebu, 43 SCRA 275 (1972)
64. CIR v. Bank of Commerce, G.R. No. 149636, June 8, 2005 – p. 27

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 65. Acebedo Optical Company v. CA et al., G.R. No. 100152, March 31,
2000
66. White Light Corp et al. v. City of Manila, G.R. NO. 122846, January 20,
2009
67. CIR v. Citytrust Investment Phils., G.R. No. 139786, 140857,
September 27, 2006
68. Villanueva v. City of Iloilo, 26 SCRA 578 (1968) – p. 30
69. CIR v. Solidbank Corp., 436 SCRA 416 (2003)
70. CIR v. Bank of Commerce, G.R. No. 149636, June 8, 2005 – p. 31
71. Compañ ia General de Tabacos de Filipinas v. City of Manila, 8 SCRA
367 (1963) – p. 31
72. Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan, Leyte, 69
SCRA 460 (1976)
73. Villanueva v. City of Iloilo, 26 SCRA 578 (1968) – p. 32

Exemption from Taxation

74. Greenfield v. Meer, 77 Phil. 394 (1946)
75. Lung Center of the Phil. v. Quezon City, G.R. No. 144104, June 23, 2004
76. Philippine Petroleum Corporation v. Pililla, 198 SCRA 82 (1991)
77. Floro Cement v. Gorospe, 200 SCRA 480 (1991)
78. Manila Electric Company v. Vera, 67 SCRA 351 (1975)
79. CIR v. Guerrero, 21 SCRA 180 (1967)
80. Meralco v. Vera, 67 SCRA 351 (1975)
81. Marli Plywood & Veneer Corporation v. Arañ as, 109 Phil. 664 (1960)
82. Rodriguez v. Collector, G.R. No. L-23041, July 31, 1969
83. City Government of San Pablo v. Reyes, G.R. No. 127708, March 25,
1999
84. Manila Electric Company v. Prov. of Laguna, 306 SCRA 750 (1999)
85. Asiatic Petroleum Co., Ltd. v. Llanes, 49 Phil. 466 (1926)

Tax Laws
A. Statutes levying taxes are construed against the government
86. CIR v. Fireman’s Fund Insurance Co., 148 SCRA 315 (1987)

B. Construction of statute by predecessors is not binding on the successors

87. Hilado v. Collector, 100 Phil. 288 (1956)

C. Retroactive application
88. Tañ ada v. Tuvera, G.R. No. L-63915, April 24, 1985

D. When the Supreme Court decides a case, it does not pass a new law, but
merely interprets a pre-existing one

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 89. Accenture v. CIR, G.R. No. 190102, July 11, 2012

E. Principle of legislative approval by re-enactment

90. Saguiguit v. People, cited in Gulf Air Company Phil Branch v. CIR, G.R.
No. 182045, September 19, 2012
91. CIR v. Burroughs Limited, 142 SCRA 324 (1986) – p. 39
92. City of Baguio v. de Leon, 25 SCRA 938 (1968)
93. CIR v. Burroughs Limited, 142 SCRA 324 (1986) – p. 40

Regulations
94. Olsen v. Aldanese, 43 Phil. 64 (1922)
95. Public Schools District Supervisors Association v. Hon. Edilberto de
Jesus, G.R. No. 157299, June 19, 2006
96. Commissioner of Customs v. Hypermix Feeds Corporation, G.R. No.
179579, February 1, 2012
97. Negros Consolidated Farmers Association Multi-Purpose Cooperative
v. CIR, CTA Case No. 7994, February 17, 2012
98. Lupangco v. CA, 160 SCRA 848 (1988)
99. Tañ ada v. Tuvera, 146 SCRA 446 (1986)
100. People v. Maceren, 79 SCRA 450 (1977)

Classification of Regulations
A. Rules in the nature of subordinate legislation
101. CIR v. CA, G.R. No. 119761, August 29, 1996, 261 SCRA 236

B. Interpretative rules
102. Gonzales v. Land Bank of the Philippines, 183 SCRA 520 (1990)
103. Manila Jockey Club v. CA, G.R. No. 103533, December 15, 1998

Necessity for Notice and Hearing

104. Corona v. United Harbor Pilots Association of the Phil., G.R. No.
111953, December 12, 1997
105. Review Center Association v. Exec. Secretary, G.R. No. 180046, April 2,
2009

Publication
106. La Suerte Cigar & Cigarette Factory v. CIR, G.R. No. L-36131, January
17, 1985
107. Tañ ada v. Tuvera, 136 SCRA 27 (1985)

Special laws prevail over general laws

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 108. Guagua Electric Light Plant Co v. Collector of Internal Revenue, 19
SCRA 790 (1967)

Tax Evasion v. Tax Avoidance

109. CIR v. Estate of Benigno P. Toda, Jr., 438 SCRA 290 (2004)
110. Philip Manufacturing Corp v. CIR, G.R. No. L-197737, August 26, 1968

Taxpayer’s Suit
111. Pascual v. Secretary of Public Works, 110 Phil. 331 (1960)

Set-off or Compensation Taxes

112. Caltex Philippines Inc. v. COA, G.R. No. 92585, May 9, 1992
113. Philex Mining Corporation v. CIR, 294 SCRA 687 (1998)
114. Francia v. Intermediate Appellate Court, G.R. No. L-67649, June 28,
1988 – p. 49
115. Republic v. Mambulao Lumber Company, 4 SCRA 622 (1962)
116. Domingo v. Garlitos, 8 SCRA 443 (1963) – par. 2
117. Francia v. Intermediate Appellate Court, G.R. No. L-67649, June 28,
1988 – p. 50
118. Domingo v. Garlitos, 8 SCRA 443 (1963) – par. 5

CHAPTER II
INHERENT AND CONSTITUTIONAL LIMITATIONS

119. Hongkong & Shanghai Banking Corporation v. Rafferty, 39 Phil. 145 (1918)
120. Roxas v. CTA, 23 SCRA 276 (1968)

Inherent Limitations
A. The levy must be for a public purpose
121. Planters Products Inc., v. Fertiphil Corp., G.R. No. 166006, March 14,
2008
122. Citizens Savings and Loan Association of Cleveland, Ohio v. Topeka
City, 20 Wall. 655, 22 L. Ed. 455
123. Lutz v. Araneta, 98 Phil. 148 (1966)
124. Bagatsing v. Ramirez, 74 SCRA 306 (1976)

Taxpayer’s suit
125. Tolentino v. Comelec, 41 SCRA 702 (1971)
126. Sanidad v. Comelec, 73 SCRA 333 (1976)
127. Chavez v. Public Estates Authority, G.R. No. 133250, July 9, 2002
128. Tatad v. Garcia, 243 SCRA 436 (1995)

6
 129. Information Technology Foundation v. Comelec, G.R. No. 159139,
January 13, 2004
130. Jumamil v. Café, G.R. No. 144570, September 21, 2005
131. Pascual v. Secretary of Public Works, 110 Phil. 331 (1960)
132. White Plains Homeowners Association, Inc. v. CA, 297 SCRA 547
(1998)
133. Albon v. Fernando, G.R. No. 148357, June 30, 2006

134. Gaston v. Republic Planters Bank, 158 SCRA 626, 1988

B. Non-delegation of the legislative power to tax

C. Exemption from taxation of government entities

D. International comity
135. Deutsche Bank AG Manila Branch v. CIR, G.R. No. 188550, August 19,
2013 – p. 56
136. CIR v. Mitsubishi Metal Corporation 181 SCRA 82 (1990)
137. CIR v. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April
25, 2012
138. Deutsche Bank AG Manila Branch v. CIR, G.R. No. 188550, August 19,
2013 – p. 59

E. Territorial jurisdiction
139. Manila Electric Company v. Yatco, 69 Phil. 89 (1939)
140. Philippine Guaranty Co v. CIR, 15 SCRA 1 (1965)
141. CIR v. British Overseas Airways Corporation, 149 SCRA 395 (1987)

Constitutional Limitations
A. No person shall be deprived of life, liberty, or property without due process of
law (Sec. 1, Art. III, 1987 Constitution)
142. Sison v. Ancheta, 130 SCRA 654 (1984) – p. 61
143. Sison v. Ancheta, 130 SCRA 654 (1984) – p. 62
144. Villegas v. Hiu Chiong Tsai Pao Ho, 86 SCRA 270 (1978)
145. Province of Abra v. Hernando, 107 SCRA 104 (1981)

B. Nor shall any person be denied the equal protection of the laws (Sec. 1, Art. III,
1987 Constitution)
146. Commissioner of Customs v. Hypermix Feeds Corporation, G.R. No.
179579, February 1, 2012

7
 147. Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. et al.
v. Tan, G.R. No. 91311, June 30, 1988
148. Eastern Theatrical Co., Inc. v. Alfonso, 83 Phil. 852 (1949)
149. British American Tobacco v. Jose Isidro N. Camacho, G.R. No. 163583,
August 20, 2008, 562 SCRA 511
150. Rufino R. Tan v. Ramon R. Del Rosario, Jr., G.R. Nos. 109289 and
109446, October 13, 1994, 237 SCRA 324, 331
151. Tiu v. CA, 301 SCRA 278 (1999)
152. Parayno v. Jovellanos, G.R. No. 148408, July 14, 2006

C. The rule on taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation (Sec. 28 (1), Art. III, 1987 Constitution)
153. Pepsi-Cola Bottling Co. of the Philippines, Inc. v. City of Butuan, 24
SCRA 789 (1968)
154. J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413
(1970)
155. Churchill & Tait v. Concepcion, 34 Phil. 969 (1916)
156. The Shell Co. of P.I., Ltd. v. Vañ o, 94 Phil. 389 (1954)
157. Punsalan v. Mun. Board of Manila, 95 Phil. 46 (1954)
158. Manila Race Horse Trainers Association v. Dela Fuente, 88 Phil. 60
(1951)
159. Association of Customs Brokers, Inc. v. Mun. Board of Manila, 93 Phil.
107 (1953)

D. No law impairing the obligation of contracts shall be passed (Sec. 10, Art III,
1987 Constitution)
160. Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667
(1996)
161. Cagayan Electric Power & Light Co., Inc. v. CIR, G.R. No. L-60126,
September 25, 1985
162. Philippine Power & Development Co., Inc. v. CIR, CTA Case No. 1152,
October 31, 1965
163. Christ Church v. Philadelphia, 24 How. 300 (1860)
164. Casanova v. Hord, 8 Phil. 125 (1907)
165. Manila Railroad Company v. Insular Collector of Customs, 12 Phil. 146
(1915)

E. The free exercise and enjoyment of religious profession and worship, without
discrimination or preference, shall forever be allowed (Sec. 5, Art. III, 1987
Constitution)
166. American Bible Society v. City of Manila, 101 Phil. 386 (1957)

8
F. Freedom of the press

G. Tax exemption of properties for religious, charitable, and educational

purposes (Sec. 28 [3], Art. III, 1987 Constitution)
167. CIR v. St. Luke’s Medical Center, Inc., G.R. Nos. 195909 and 195960,
September 26, 2012
168. Lung Center of the Philippines v. Quezon City, G.R. No. 144104, June
29, 2004 – p. 81
169. CIR v. St. Luke’s Medical Center, Inc., G.R. No. 203514, February 13,
2017
170. Lladoc v. CIR, 14 SCRA 292 (1965) – p. 82
171. Hospital de San Juan de Dios v. Pasay City, 16 SCRA 226 (1966)
172. Praire Du Chian Sanitarium Co. v. City of Praire Du Chian, 242 Wis.
262, 7 NW (2d) 832, 144 ALR 1480
173. Herrera v. QC Board of Assessment Appeals, 3 SCRA 186 (1961)
174. CIR v. CA, G.R. No. L-124043, October 14, 1998
175. Lung Center of the Philippines v. Quezon City, 433 SCRA 119 (2004) –
p. 84
176. Lladoc v. CIR, 14 SCRA 292 (1965) – p. 84

H. All appropriation, revenue, or tariff bills shall originate from the House of
Representatives, but the Senate may propose or concur with amendments (Sec.
24, Art. VI, 1987 Constitution
177. Tolentino v. Secretary of Finance, G.R. No. 115455, October 30, 1995

I. No law granting any tax exemption shall be passed without the concurrence of
a majority of all the members of the Congress (Sec. 28 [4], Art. VI, 1987
Constitution)
178. John Hay Peoples Alternative Coalition, et al. v. Lim, G.R. No. 119775,
October 24, 2003

J. Every bill passed by Congress shall embrace only one subject, which shall be
expressed in the title thereof (Sec 26 [1], Art. IV, 1987 Constitution)

K. Congress shall evolve a progressive system of taxation.

L. Supremacy of the national government over local governments in taxation

179. Manila International Airport Authority v. CA, G.R. NO. 155650, July 20,
2006
180. Basco v. PAGCOR, 197 SCRA 52 (1991)

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PART II.
INCOME AND WITHHOLDING TAXES

CHAPTER III
INTRODUCTION

Income Tax Systems

1. Global Tax System
181. Mercury Drug Corporation v. CIR, G.R. No. 164050, July 20, 2011

2. Schedular Tax System

3. Semi-Schedular or Semi-Global Tax System

Features of the Income Tax Law

182. CIR v. Tours Specialists, Inc., 183 SCRA 402 (1990)

Direct Tax distinguished from Indirect Tax

183. CIR v. Philippine Long Distance Telephone Company, 178 SCRA 61
(2005)
184. Maceda v. Macaraig, 197 SCRA 771 (1991)

Criteria in Imposing Income Tax

1. Citizenship Principle
2. Residence Principle
3. Source Principle

When is income tax taxable

CHAPTER IV
KINDS OF TAXPAYERS

Citizens
185. Calderon v. CIR, CTA Case No. 9090, March 27, 2018

10
Aliens
186. Garrison v. CA and Republic, 187 SCRA 525 (1990)

Estates and Trusts

187. CIR v. Visayan Electric Co., 233 SCRA 715 (1968)

Co-ownership

Co-ownership Due to Death of a Decedent

1. Before partition of property
2. After partition of property
188. Ona v. CIR, 45 SCRA 74 (1972)
189. Lorenzo Oñ a et al. v. CIR, 45 SCRA 74 (1972)

Isolated transactions of unimproved properties

190. Pascual v. CIR, 166 SCRA 560 (1988)

Transfer of property from father to children

191. Obillos, Jr. v. CIR, 139 SCRA 436, 1985
192. Pascual v CIR, CTA GR No. 78133, October 18, 1988

General Professional Partnership (GPP)

A. GPP is not a taxable entity for income tax purposes
193. Tan v. Del Rosario, 237 SCRA 324 (1994) – p. 129

B. Share of partners in partnership profit is deemed distributed to the partners

in the year profit is earned

194. Tan v. del Rosario, G.R. No. 109289, October 3, 1994 – p. 133

Domestic Corporations and Foreign Corporations

Doing Business
195. CIR v. British Overseas Airways Corporation, 149 SCRA 395 (1987)

Partnerships

Joint Ventures

Taxable Joint Ventures

196. Collector v. Batangas Transportation Co., 102 Phil. 822 (1958)

11
 197. Evangelista v. Collector, 102 Phil. 140 (1957)
198. Reyes v CIR, 24 SCRA 198 (1968)
199. AFISCO Insurance Corporation v. CA, G.R. No. L-112675, January 25,
1999

Resident Foreign Corporation

200. Marubeni Corporation v. CIR, G.R. No. 76573, September 14, 1989
201. CIR v. Marubeni Corporation, G.R. No. 137377, December 18, 2001

Non-resident Foreign Corporation

202. The Philippine Guaranty Co., Inc. v. CIR, G.R. No. L-22074, April 30,
1965

CHAPTER V
GROSS INCOME

203. Madrigal v. Rafferty, 38 Phil. 414 (1918)

To Whom Income Is Taxable

204. Moore v. Commissioner, 124 F (2d) 991
205. Mercy’s, Inc. v. CIR, CTA Case No. 895m May 11, 1982

Final tax on interest income from loans to resident borrowers is a direct liability
of FCDU
206. RCBC v. CIR, G.R. No. 170257, September 7, 2011
207. ING Bank N.V.—Manila Branch v. CIR, CTA EB Case No. 450, March 25,
2009
208. ING Bank N.V. Manila Branch v. CIR CTA EB Case No. 52, April 5, 2005

Where legal title over the Fund is transferred to the trustee, the income of the
Fund shall accrue to the trustee, not the trustor
209. DBP v. COA, G.R. No. 144516, February 11. 2004

Source Rules
A non-resident alien is taxed only on her commission income for services
rendered in the Philippines
210. CIR v. Baier-Nickel, G.R. No. 156305, February 17, 2003
211. Commissioner v. Baier-Nickel, G.R. No. 153793, August 29, 2006

Income from turnkey contract with onshore and offshore portions

212. CIR v. Marubeni Corporation, G.R. No. 137377, December 18, 2001

12
International air carrier
213. CIR v. British Overseas Airways Corporation, 149 SCRA 395 (1987)

Enumeration of source rules above is not exclusive; reinsurance premiums paid

to a foreigner corporation is income from sources within the Philippines
214. Alexander Howden & Co., Ltd. v. Collector, G.R. No. L-19392, April 14,
1965

Definition of Income
215. Conwi v. CTA and CIR, 213 SCRA 83 (1992)
216. Madrigal v. Rafferty, 38 Phil. 414 (1918)
217. Fisher v. Trinidad, 43 Phil. 973 (1922)
218. James v. U.S., 366 U.S. 213
219. Philippines v. Salem Investment Corporation, et al., G.R. No. 137569,
June 23, 2000
220. Capitol Steel Corporation v. Phividec Industrial Authority, G.R. No.
169453, December 6, 2006
221. Capitol Steel Corporation v. CIR, CTA Case No. 9240, October 26, 2017

Recognition of revenue when offsetting concurrent obligations

222. Madrigal v. Rafferty, G.R. No. L-12287, August 7, 1918

Distinctions between Capital and Income

223. Madrigal v. Rafferty, 38 Phil. 414 (1918)

Tests in determining income

224. Eisner v. Macomber, 252 U.S. 189
225. Fisher v. Trinidad, 43 Phil. 973 (1922)
226. Spouses Araneta v. CIR, CTA Case NO. 1699, November 6, 1970
227. Commissioner v. Wilcox, 286 U.S. 417, 424
228. CIR v. Javier, 199 SCRA 824 (1991)
229. Gutierrez v. CTA and Collector, 101 Phil. 713 (1957)
230. BDO v Republic, GR No. 198756, January 13, 2015
231. Commissioner v. Smith, 324 US 177

Significance of Knowing the Type or Character of Income

Compensation Income
232. Brotherhood Labor Unity Movement of the Philippines v. Zamora, G.R.
No. L-48645, January 7, 1987
233. David v. Macasio, G.R. No. 1954661, July 2, 2014

13
Who is an employee
234. First Lepanto Taisho Insurance Corporation v. CIR, G.R. No. 197117,
April 10, 2013

Compensation income of Philippine Nationals and Aliens Employed by Foreign

Governments and International Organizations in the Philippines

Foreign Embassies and Diplomatic Missions

Statutory Minimum Wage

235. Soriano v. Secretary of Finance, G.R. No.184450, January 24, 2017
236. Escareal v. CIR, CTA Case No. 5194, September 2, 1996

Backwages, Allowances, and Benefits Awarded in Labor Dispute

Items Not Included as Compensation Income

237. Nitafan et al v. CIR, 152 SCRA 284 (1987)

Fringe Benefits

De minimis Benefits
238. Collector v. Henderson, 1 SCRA 649 (1961)

Stock Option Plans

239. Commissioner v. Smith, 324 U.S. 177

240. Collector v. Henderson, 1 SCRA 649 (1961)

Trade or Business Income or Professional Income

241. CIR v. British Overseas Airways Corporation, 149 SCRA 395 (1987)
242. Luzon Stevedoring Co. v. Trinidad, 43 Phil. 803 (1922)
243. CIR v. Engineering Equipment and Supply Co., 64 SCRA 597 (1975)
244. Advertising Associates v. Court of Appeals, 133 SCRA (1984)

Sales or exchanges of real property

245. Capitol Steel Corporation v. CIR, CTA Case No. 9240, October 26, 2017
246. Association of Small Landowners in the Phil., Inc., et al. v. Secretary of
Agrarian Reform, G.R. No. 78742, July 14, 1989

Professional Income

14
Capital Assets
247. Del Rosario v CIR, CTA Case No. 4796, December 1, 1994
248. Compagnie Financiere Sucres et Denrees v. CIR, G.R. No. 133834,
August 28, 2006
249. China Banking Corporation v. CA, G.R. No. 125508, July 19, 2000

Deed of Exchange
Rules on non-redemption of property sold during involuntary sales
Real property located outside the Philippines

250. CIR v. Estate of Benigno P. Toda, Jr., 438 SCRA 290 (2004)

Other capital assets

Passive investment income

251. CIR v. CA and GCL Retirement Plan, 207 SCRA 487 (1992)

Dividend Income
252. Fisher v. Trinidad, 43 Phil. 973 (1922) – p. 218

Distinctions between Cash Dividend and Stock Dividend

253. Fisher v. Trinidad, 43 Phil. 973 (1922) – p. 219
254. Hyatt v. Alen, 56 N.Y. 553

Stock dividends
255. CIR v. CA, CTA and A. Soriano Corporation, 301 SCRA 152 (1999)

Rules on Taxation of Dividends

Recipient is a domestic corporation or a resident foreign corporation

256. Filipinas Life Assurance Co. v. CTA and CIR, 21 SCRA 622 (1967)
257. CIR v. Procter & Gamble PMC, 204 SCRA 377 (1991)
258. CIR v. Wander Philippines, Inc., 160 SCRA 573 (1988)

Royalty Income
259. CIR v. S.C. Johnson & Sons, G.R. No. 127105, June 25, 1999
260. Wrigley Philippines v. CIR, CTA Case No. 7138, July 26, 2007

Rental Income

15
Other Income
261. Gutierrez v. CTA and Collector, 101 Phil. 713 (1957)
262. Commissioner v. Smith, 324 U.S. 177
263. Fernandez Hermanos Inc. v. CIR, CTA Case 787, June 10, 1963

Prizes and Awards

264. James v. US, 366 US 213, 1961

265. Commissioner v. Duberstein, 363 U.S. 278
266. CIR v. YMCA, G.R. No. 124043, October 14, 1998
267. CIR v. St. Luke’s Medical Center, Inc., G.R. Nos. 195909 and 195960, September
26, 2012
268. Fisher v. Trinidad, 43 Phil. 73 (1922)

CHAPTER VI
EXCLUSION FROM GROSS INCOME

269. Greenfield v. Meer, 77 Phil. 394 (1946)

270. CIR v. Mitsubishi Metal Corp., 181 SCRA 214 (1990)

Categories of Exclusions from Gross Income

271. Dumaguete Cathedral Credit Cooperative v. CIR, G.R. No. 182722, January 22,
2010

Under the 2005 Tax Code

Exclusions from Gross Income

A. Proceeds of life insurance policies
B. Amounts received under life insurance, endowment, or annuity
contracts
272. El Oriente Fabrica de Tabacos Inc. v. Posadas, 56 Phil. 147
(1931)

C. Value of property acquired by gift, bequest, devise or descent

273. Pirovano v. CIR, 14 SCRA 832 (1965)

D. Amounts received through accident or health insurance

274. B.F. Metal v. Spouses Lomotan, G.R. No. 170813, April 16, 2008
275. Sulpicio Lines v. Curso, G.R. No. 157009, March 17, 2010
276. Kierulf v. CA, G.R. No. 99301, March 13, 1997

16
 277. Francisco v. Ferrer, G.R. No. 142029, February 28, 2001
278. ABS-CBN Broadcasting Corporation v. CA, 301 SCRA 575
(1999)
E. Income exempt under treaty
279. National Development Company v. CIR, G.R. No. L-53961, June
30, 1987
F. Retirement benefits, pensions, gratuities, etc.
280. CIR v. GCL Retirement Plan, G.R. No. 95022, March 23, 1992

For any cause beyond the control of the said official or employee
281. CIR v. CA, Castaneda, 203 SCRA 72 (1991) – p. 266
282. CIR v. CA, Castaneda, G.R. No. 96016, October 17, 1991 – p. 268
283. CIR v. CA, G.R. No. 96016, October 17, 1991
284. Stanton v. U.S., 186 F. Supp. 393

Miscellaneous items
Income of foreign governments
285. Philippine Long-Distance Telephone Co. v. CIR, CTA Case No.
4375, January 7, 1992

Loan agreement without stipulation that foreign creditors act for Eximbank
286. Asia Transmission Corporation v. CIR, CTA Case No. 3380, July
27, 1988

Loan and sales contract without reference to Eximbank

287. CIR v. Mitsubishi Metal Corporation, 181 SCRA 82 (1990)
288. Government of Singapore Investment Corp v. CIR, CTA Case Nos. 6745, June 6,
2008 and 7726, April 29, 2010

Gains cannot include interest

289. Nippon Life Insurance Company v. CIR, CTA Case No. 642,
February 4, 2002
290. Malayan Zurich Insurance Co., Inc. v. CIR, CA-GR SP No. 77070,
March 28, 2005

Exempt Corporations

Non-Profit, Inurement Prohibition

291. Collector v. Club Filipino, Inc. de Cebu
292. Lung Center of the Philippines v. Quezon City
293. CIR v. St. Luke’s Medical Center, Inc., G.R. Nos. 195909 and 195960,
September 26, 2012

17
Educational Institutions
294. CIR v. De La Salle University, Inc., G.R. Nos. 196596, 198841, 198941,
November 9, 2016 – p. 285
295. Southeast Asian Regional Center for Graduate Study and Research in
Agriculture v. CIR, CTA Case No. 4982, October 6, 1995
296. Xavier School, Inc. v. CIR, CTA Case No. 1682, October 8, 1969
297. Collector v. V.G. Sinco Educational Corporation, 100 Phil. 127 (1956)
298. CIR v. De La Salle University, Inc., G.R. Nos. 196596, 198841, 198941,
November 9, 2016 – 9. 288

Charitable Organizations
299. CIR v. YMCA, G.R. No. 124043, October 14, 1998

Clubs for Pleasure, Recreation, and Other Non-Profit Purposes

300. CIR v. COMASERCO, G.R. No. 125355, March 30, 2000

Non-Stock, Non-Profit Hospital

301. CIR v. St. Luke’s Medical Center, Inc., G.R. Nos. 195909 and 195960,
September 26, 2012 – p. 291
302. City Assessor of Cebu City v. Association of Benevola de Cebu, Inc., 524
SCRA 128 (2007)
303. CIR v. St. Luke’s Medical Center, Inc., G.R. Nos. 195909 and 195960,
September 26, 2012 – p. 292

Requirement for revalidation of tax exemption for non-stock. non-profit

corporations and associations
304. CIR v. St. Paul College of Makati, G.R. No. 215383, March 8, 2017
305. Congregracion de la Mission de San Vicente de Paul v. Collector, CTA
Case No. 1468, October 14, 1968
306. CIR v. CA and YMCA, 298 SCRA 83 (1998) – p. 295 par. 1
307. CIR v. CA and YMCA, 298 SCRA 83 (1998) – p. 295 par. 2

CHAPTER VII
RETURN OF CAPITAL AND DEDUCTIONS

Return of Capital
Deductions are construed strictly against the taxpayer claiming it
308. Western Minolco Corporation v. CIR, 124 SCRA 212 (1983)
309. Commissioner of Customs v. Philippine Acetylene Co., 39 SCRA 70
(1971)
310. CIR v. Arnoldus Carpentry Shop, Inc., 159 SCRA 199 (1988)

18
Deductions from Gross Income

Business Expenses
311. General Electric (P.I.), Inc. v. Collector, CTA Case 1117, July 14, 1963
312. CIR v. General Foods (Phils.) Inc., G.R. No. 143672, April 24, 2003
313. CIR v. General Foods (Phils.) Inc., G.R. No. 143672, April 24, 2003

Professional expenses are deductible in the year the professional services are
rendered, not in the year they are billed
314. CIR v. Isabela Cultural Corporation, G.R. No. 172231, February 12,
2007

Additional requirements for deductibility of certain payments

315. C.M. Hoskins & Co., Inc. v. CIR, 30 SCRA 434 (1969)
316. Consolidated Mines, Inc. v. CTA and CIR, 58 SCRA 618 (1974)
317. 3M Philippines, Inc. v. CIR, G.R. NO. 82833, September 26, 1988
318. Rutkin v. U.S., 343 U.S. 130
319. Zamora v. Collector, 8 SCRA 163 (1963)
320. Roxas v. CTA and CIR, 23 SCRA 276 (1968)

Optional treatment of interest expense on capital expenditure

321. Paper Industries Corporation of the Philippines v. CIR, 250 SCRA 434
(1995)

Definition of Indebtedness
322. CIR v. Prieto, G.R. No. L-13912, September 30, 1960

323. CIR v. Palanca, 18 SCRA 496 (1966)

324. CIR v. Prieto, G.R. No. L-13912, September 30, 1960 – p. 316
325. Basilan Estates, Inc. v. CIR, 21 SCRA 17 (1967)

Taxes

Losses

Bad Debt Theory

326. Talisay-Silay Milling Co. v. CIR, CTA Case No. 1399, December 29, 1965

Losses must be evidenced by closed and completed transaction

327. Plaridel Surety & Insurance Co. v. CIR, 21 SCRA 1187 (1967)

19
 328. Alhambra Cigar & Cigarette Mfg. Co. v. Collector, CTA Case No. 143,
July 31, 1956
329. Collector v. Goodrich International Rubber Co., 21 SCRA 1336 (1967)
330. PRC v. CA, 256 SCRA 667 (1996)

Bad Debts
331. Collector v. Goodrich International Rubber Co., 21 SCRA 1336 (1967)

Tax Benefit Rule

332. Philippine Fiber Procession Co. v. CIR, CTA Case No. 1407, December
29, 1966

Depreciation

Rules on Depreciation of Vehicles

333. Basilan Estates, Inc. v. CIR, 21 SCRA 17 (1967)

Conditions for Deductibility of Depreciation

Charitable contributions
334. Philippine Stock Exchange v. CIR, CTA Case No. 5995, October 15,
2002

Optional Standard Deduction

335. Madrigal v. Rafferty, 38 Phil. 414 (1918)

Basic Personal Exemptions and Deduction

Status-at-the-end-of-the-year rule

Non-Deductible Expenses
336. Deputy v. Du Pont, 308 US 488 (1940)

Tax Credit
337. CIR v. Central Luzon Drug Corporation, G.R. No. 159647, April 15,
2005
338. Manila Memorial Park, Inc. v. Department of Social Welfare and
Development, 711 SCRA 302 (2013)

Irrevocability Rule
339. Philippine Bank of Communications v. CIR, 361 Phil. 916 (1999)
340. Systra Philippines, Inc. v. CIR, G.R. No. 176290, September 21, 2007

20
 341. Rhombus Energy, Inc. v. CIR, G.R. No. 206362, August 01, 2018
342. Asiaworld Properties Philippine Corporation v. CIR, G.R. No. 171766,
July 29, 2010

CHAPTER VIII
TAX BASES AND RATES

Domestic Corporations
343. Manila Banking Corporation v. CIR, CA-GR SP No. 77177, May 11, 2005
344. John Hay Peoples Alternative Coalition v. Lim, G.R. No. 119775,
October 24, 2003

Resident Foreign Corporations that are Subject to Preferential Tax Rates

345. CIR v. American Airline Inc., 180 SCRA 274 (1989)

Branch Profit Remittance Tax on Philippine branch of Foreign Corporations

346. Bank of America NT and SA v. CA, 234 SCRA 302 (1994)
347. Bank of America NT and SA v. CA, 234 SCRA 302 (1994)

Income of Non-resident Foreign Corporation Subject to Preferential Tax Rates

348. CIR v. Wander Philippines, Inc., 160 SCRA 573 (1988)

Failure to strictly comply with Revenue Memorandum Order No. 1-2000 which
requires the taxpayer to secure prior tax treaty relief from the BIR will not deprive
taxpayers of the benefit of a tax treaty
349. Mirant (Phils) Operations Corporation v CIR, CTA EB No. 40, June 7,
2005
350. Philippine Health Care Providers v. CIR
351. CIR v. S.C. Johnson and Son, G.R. No. 127105, June 25, 1999
352. Deutsche Bank AG Manila Branch v. CIR, G.R. No. 188550, August 19,
2013
353. CBK Power Company Limited v. CIR, G.R. Nos. 193383-34, January 14,
2015

Definition of Paid-up Capital

354. Cebu Air, Inc. v. CIR, CTA Case NO. 9106, January 11, 2018

Transfer for inadequate consideration

355. Commissioner v. B.F. Goodrich Philippines (G.R. No. 104171, February
24, 1999)

21
 CHAPTER IX
ORDINARY ASSETS AND CAPITAL ASSETS

Sale or Exchange
356. Helvering v. Hammel, 311 U.S. 504
357. Helvering v. Chester N. Weaver Co., 305 U.S. 293
358. U.S. Industrial Alcohol Co. v. Helvering, 137 F. [2d] 511
359. Kieselback v. Commissioner, 317 U.S. 399, 87 L. ed. 358, 63, S. Ct. 303
360. Filinvest Credit Corporation v. Philippine Acetylene Co., Inc. 111 SCRA
421 (1982)
361. Supreme Transliner Inc. v. BPI Family Savings Bank, G.R. No. 165617,
February 25, 2011

Capital Assets
362. Calasanz v. CIR, G.R. No. L-26284, October 9, 1986

CHAPTER X
TAX-FREE EXCHANGES

Tax-free Exchanges
363. CIR v. Filinvest Development Corporation, G.R. Nos. 163653 and
167689, July 19, 2011
364. Parity Packaging Corp. v. CIR, CTA Case No. 8825, September 19, 2017
365. CIR v. Filinvest Development Corporation and Filinvest Alabang Inc.,
CA-GR SP No. 74510, January 26, 2005

CHAPTER XI
ACCOUNTING METHODS AND PERIODS

Income is recognized when earning process is complete and exchange has taken
place
366. Manila Mandarin Hotels v. CCIR, CTA Case No. 5046, March 24, 1997

“All Events Test” is followed for expenses

367. Spencer, White & Prentis v. Commissioner, 144 F.2d 45, 2d Cir. 1944

Crop method (RAM No. 2-95)

368. CIR v. Lancaster Philippines Inc., G.R. No. 183408, July 12, 2017

Individual deriving purely trade, business or professional income, or mixed income

369. Garrison v. CA and Republic, 187 SCRA 525 (1990)

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 CHAPTER XII
WITHHOLDING TAXES

Importance of Withholding Taxes

370. Bank of America and SA v. Court of Appeals and CIR, 234 SCRA 302 (1994)

Remittance of Withheld Taxes Is the Responsibility of The Withholding Agent-Payor

of Income
371. CIR v. Asian Transmission Corporation, G.R. No. 179617, January 19, 2011

Final Withholding Tax

Creditable Withholding Tax

Expanded Withholding Tax

Persons Exempt from Withholding Tax

The income is fixed or determinable at the time of the payment

The income payment is listed in the regulations as subject to withholding

The recipient of income is a resident of the Philippines

The payor-withholding agent is a resident of the Philippines

Withholding Agent

Time to Withhold and Remit Tax

Time to Credit Expanded Withholding Tax from Income Tax

Consequences of Non-Withholding of Tax by the Payor of Income

Consequences of Non-Remittance of Tax Withheld by the Withholding Agent with

respect to the Payee
372. CIR v. Asian Transmission Corporation, G.R. No. 179617, January 19, 2011

Bases of Withholding Tax

Withholding Tax based on gross income

23
 Withholding tax based on gross selling price or fair market value, whichever is
higher

Withholding Tax Rates

Venue for Filing Withholding Tax Returns and Time for payment of tax

24