1. CIR VS.

ALGUE AND CTA- PETITION DENIED CTA AFFIRMED

Algue , a domestic corporation in engineering and construction industry received a delinquency income tax
assessment of Php 83k plus for 1958-1959 on January 1965.

4 days later, Algue protested the assessment. On March, a warrant of distraint and levy issued was refused to
received because of the pending protest. April 1965 Algue was informed that no action would be taken on its
protest leading to acceptance of warrant. April 1965 Algue appealed to CTA.

Issue:

a. W/N the appeal was timely filed and in compliance with legal requirements?
b. W/N 75,000 deduction claimed by algue as legitimate business expenses was validly disallowed by CIR.

Ruling:

a. Timeliness- appeal to the CTA was timely. There is a suspending effect. Reglementary period started on
date of assessment was received on Jan 14 1965. The period start running again on April 7 when Algue
was informed of rejection of protest. The appeal was filed April 23, only 20 days of the reglementary
period had been consumed.

b. Validity of 75000 deduction- SC affirmed CTA that the payments constituted legitimate business expense.
Deduction should be ordinary and necessary expenses paid or incurred in carrying on a business. Which
Algue satisfactorily demonstrated through role of payments in information of vegetable oil investment
corp.

2. CIR VS. TOKYO SHIPPING CORP- PETITION DENIED CTA AFFIRMED

Tokyo Shipping was represented by Soriamont Steamship agency owned and operated the tramper vessel M/V
Gardenia which was chartered by NASUTRA to load raw sugar. Soriamont pre paid income and common carrier
taxes.

M/V Gardenia arrived in iloilo with no sugar available for loading. Nasutra and agent agreed to sail to Japan
without cargo.

Tokyo filed claim for refund on tax credit arguing taxes were paid in error as no income was realized due to
absence of cargo. CIR did not act. Tokyo file petition for review with CTA.

CIR opposed claiming taxes were correctly collected taxpayer has burden of proof to show erroneous or illegal
tax collection. CTA favored Tokyo.

Issue:

a. W/N Tokyo bear a burden of proof in establishing a refund claim for erroneous collection of tax
b. W/N Tokyo successfully prove it did not earn any income from its charter agreement with NASUTRA
c. Can Contention that Tokyo suppressed evidence by not presenting charter agreement be applied

Ruling:

a. Burden of Proof- claim for refund. Tokyo met this by providing adequate evidence such as clearances and
certification from custom demonstrating the vessel did not carry cargo on its voyage.
b. Proof of no Income- Court agreed with CTA that sufficiency showed that no income was derived by
Tokyo from failed shipping agreement.
c. Allegations of suppressed evidence- No merit in CIR argument by not presenting agreement. CIR did not
utilize available procedural instruments such as subpoena duces tecum, to compel its submission.
 3. BPI-FAMILY SAVINGS BANK vs. CA,CTA and CIR- PETITION DENIED CTA AFFIRMED
Facts:

BPI-Family Savings Bank (BPI-FSB) filed its Corporate Annual Income Tax Return for the year 1989, indicating a
net loss, and reflecting a total refundable amount of P297,492, including P112,491 in excess taxes withheld.
Despite the refundable amount, BPI-FSB declared in its 1989 return that this amount would be applied as a tax
credit for the succeeding taxable year (1990).
, BPI-FSB filed a written claim with the Commissioner of Internal Revenue (CIR) seeking a refund for the
P112,491 excess withholding tax from 1989. BPI-FSB alleged its business losses meant they did not credit the
P297,492 to its 1990 tax liabilities.
Without a response from the CIR, BPI-FSB sought relief from the CTA. However, the CTA dismissed the petition
due to a failure to submit proof, specifically the 1990 Corporate Annual Income Tax Return, to confirm that no
credit was applied to the 1990 liabilities. **: After denial by the CTA, BPI-FSB’s Motion for Reconsideration was
rejected. They then escalated the matter to the Court of Appeals (CA), which affirmed the CTA’s dismissal.

Issue:

whether BPI-FSB was entitled to a tax refund of P112,491 for the excess taxes withheld in 1989, despite its
earlier declaration to apply this as credit in 1990.

Ruling:

The Supreme Court found the petition to be meritorious. It was held that the CA erred in presuming that the
refund amount had been utilized as a tax credit without considering the entire evidentiary record, particularly
the Final Adjustment Return for 1990, which demonstrated a net loss and that no credit was applied. BPI-FSB
submitted significant proof, including testimonies and a certification from company officers, which went
unrefuted by the CIR. The SC noted that the CTA proceedings should not be constrained by strict technical rules,
and the clear facts should direct a just conclusion.

4. PBCOM vs. CIR- PETITION DENIED CTA AFFIRMED

petition for review assails the Resolution 1of the Court of Appeals dated September 22, 1993 affirming the
Decision2 and a Resolution 3 of the Court Of Tax Appeals which denied the claims of the petitioner for tax refund
and tax credits.

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. The taxes due were settled by applying PBCom's tax credit memos and
accordingly, the Bureau of Internal Revenue (BIR). 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 and thus declared
no tax payable for the year.

But during these two years, PBCom earned rental income from leased properties.

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. Petitioner filed a claim for
refund of creditable taxes withheld by their lessees from property rentals in 1985 and 1986. Pending
investigation, Petitioner instituted a Petition for before the Court of Tax Appeals (CTA).

CTA denied the request for tax refund or credit on ground it was filed beyond 2 year reglementary period and
denied on assumption that it was automatically credited by PBCOM against its tax payment in the succeeding
year.

Petitioner filed MR and was denied. So filed Petition for review to CA. CA affirmed decision of CTA.

Issue:

Whether or not 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:

Petitioner argues that its claims for refund and tax credits are not yet barred by prescription relying on the
applicability of Revenue Memorandum Circular No. 7-85 issued on April 1, 1985. The circular states that
overpaid income taxes are not covered by the two-year prescriptive period under the tax Code and that
taxpayers may claim refund or tax credits for the excess quarterly income tax with the BIR within ten (10) years
under Article 1144 of the Civil Code. The pertinent portions of the circular reads:

In this regard, therefore, there is no need to file petitions for review in the Court of Tax Appeals in order to
preserve the right to claim refund or tax credit the two year period. As already stated, actions hereon by the
Bureau are immediate after only a cursory pre-audit of the income tax returns. Moreover, a taxpayer may
recover from the Bureau of Internal Revenue excess income tax paid under the provisions of Section 86 of the
Tax Code within 10 years from the date of payment considering that it is an obligation created by law (Article
1144 of the Civil Code).9

petitioner claims that rulings or circulars promulgated by the Commissioner of Internal Revenue have no
retroactive effect if it would be prejudicial to taxpayers.

Respondent Commissioner of Internal Revenue, through Solicitor General, argues that the two-year prescriptive
period for filing tax cases in court concerning income tax payments of Corporations is reckoned from the date of
filing the Final Adjusted Income Tax Return, which is generally done on April 15 following the close of the
calendar year. As precedents, respondent Commissioner cited cases which adhered to this principle, to
wit ACCRA Investments Corp. vs. Court of Appeals, et al., 11 and Commissioner of Internal Revenue vs. TMX Sales,
Inc., et al.. 12Respondent Commissioner also states that since the Final Adjusted Income Tax Return of the
petitioner for the taxable year 1985 was supposed to be filed on April 15, 1986, the latter had only until April 15,
1988 to seek relief from the court. Further, respondent Commissioner stresses that when the petitioner filed the
case before the CTA on November 18, 1988, the same was filed beyond the time fixed by law, and such failure is
fatal to petitioner's cause of action.

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. 13 Due process of law under the
Constitution does not require judicial proceedings in tax cases.

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.

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.

Further, fundamental is the rule that the State cannot be put in estoppel by the mistakes or errors of its officials
or agents. 24 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.

Estoppel has no application in the case at bar because it was not the Commissioner of Internal Revenue
who denied petitioner's claim of refund or tax credit. Rather, it was the Court of Tax Appeals who denied
(albeit correctly) the claim and in effect, ruled that the RMC No. 7-85 issued by the Commissioner of
Internal Revenue is an administrative interpretation which is out of harmony with or contrary to the
express provision of a statute (specifically Sec. 230, NIRC), hence, cannot be given weight for to do so
would in effect amend the statute.25

Art. 8 of the Civil Code 26 recognizes judicial decisions, applying or interpreting statutes as part of the legal
system of the country. But administrative decisions do not enjoy that level of recognition. A memorandum-
circular of a bureau head could not operate to vest a taxpayer with shield against judicial action. For there are no
vested rights to speak of respecting a wrong construction of the law by the administrative officials and such
wrong interpretation could not place the Government in estoppel to correct or overrule the same. 27 Moreover,
the non-retroactivity of rulings by the Commissioner of Internal Revenue is not applicable in this case because
the nullity of RMC No. 7-85 was declared by respondent courts and not by the Commissioner of Internal
Revenue. Lastly, it must be noted that, as repeatedly held by this Court, a claim for refund is in the nature of a
claim for exemption and should be construed in strictissimi juris against the taxpayer.

Finally, as to the claimed refund of income tax over-paid in 1986 — the Court of Tax Appeals, after
examining the adjusted final corporate annual income tax return for taxable year 1986, found out that
petitioner opted to apply for automatic tax credit. This was the basis used (vis-avis the fact that the 1987
annual corporate tax return was not offered by the petitioner as evidence) by the CTA in concluding that
petitioner had indeed availed of and applied the automatic tax credit to the succeeding year, hence it can
no longer ask for refund, as to [sic] the two remedies of refund and tax credit are alternative. 30

That the petitioner opted for an automatic tax credit in accordance with Sec. 69 of the 1977 NIRC, as specified in
its 1986 Final Adjusted Income Tax Return, is a finding of fact which we must respect. Moreover, the 1987
annual corporate tax return of the petitioner was not offered as evidence to contovert said fact. Thus, we are
bound by the findings of fact by respondent courts, there being no showing of gross error or abuse on their part
to disturb our reliance thereon. 31

WHEREFORE, the, petition is hereby DENIED, The decision of the Court of Appeals appealed from
is AFFIRMED, with COSTS against the petitioner.

5. CHAVEZ VS. ONGPIN- DISMIISED

petition seeks to declare unconstitutional Executive Order No. 73. Memorandum Order No. 77 was issued
suspending the implementation of Executive Order No. 73.

The petitioner, Francisco I. Chavez, 1 is a taxpayer and an owner of three parcels of land. He alleges the following:
that Executive Order No. 73 accelerated the application of the general revision of assessments to January 1, 1987
thereby mandating an excessive increase in real property taxes by 100% to 400% on improvements, and up to
100% on land; that any increase in the value of real property brought about by the revision of real property
values and assessments would necessarily lead to a proportionate increase in real property taxes;

intervenor Realty Owners Association of the Philippines, Inc. (ROAP), which is the national association of
owners-lessors, joins Chavez in his petition to declare unconstitutional Executive Order No. 73, but additionally
alleges the following: that Presidential Decree No. 464 is unconstitutional insofar as it imposes an additional one
percent (1%) tax on all property owners to raise funds for education, as real property tax is admittedly a local
tax for local governments; that the General Revision of Assessments does not meet the requirements of due
process as regards publication, notice of hearing, opportunity to be heard and insofar as it authorizes
"replacement cost" of buildings (improvements) which is not provided in Presidential Decree No. 464, but only
in an administrative regulation of the Department of Finance; and that the Joint Local Assessment/Treasury
Regulations No. 2-86 2 is even more oppressive and unconstitutional as it imposes successive increase of 150%
over the 1986 tax.

Petitioner Chavez and intervenor ROAP question the constitutionality of Executive Order No. 73 insofar as the
revision of the assessments and the effectivity. Office of the Solicitor General that 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.

Issue:

W/N EO 73 is unconstitutional.
Ruling:

NO. Petition and petition in intervention is dismissed.

Court found EO 73 to be valid exercise of executive’s power, nothing that it introduce new taxes but merely
adjusted the base values for taxation to reflect more current real property values. Adjustment is a necessary
step in rea

Simply stated, within sixty days from the date of receipt of the, written notice of assessment, any owner who
doubts the assessment of his property, may appeal to the Local Board of Assessment Appeals. In case the, owner
or administrator of the property or the assessor is not satisfied with the decision of the Local Board of
Assessment Appeals, he may, within thirty days from the receipt of the decision, appeal to the Central Board of
Assessment Appeals. The decision of the Central Board of Assessment Appeals shall become final and executory
after the lapse of fifteen days from the date of receipt of the decision.

Certainly, 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.

ACCORDINGLY, the petition and the petition-in-intervention are hereby DISMISSED. SO ORDERED.

6. Philex Mining Corp. vs. CIR- DISMISSED

Petitioner Philex Mining Corp. assails the decision of the Court of Appeals promulgated on April 8, 1996
in CA-G.R. SP No. 369751 affirming the Court of Tax Appeals decision in CTA Case No. 4872 dated March
16, 19952 ordering it to pay the amount of P110,677,668.52 as excise tax liability for the period from
the 2nd quarter of 1991 to the 2nd quarter of 1992 plus 20% annual interest from August 6, 1994 until
fully paid pursuant to Sections 248 and 249 of the Tax Code of 1977.

The facts show that on August 5, 1992, the BIR sent a letter to Philex asking it to settle its tax liabilities
for the 2nd, 3rd and 4th quarter of 1991 as well as the 1st and 2nd quarter of 1992

Philex protested stating that it has pending claims for VAT input credit/refund for the taxes it paid for
the years 1989 to 1991. Therefore these claims for tax credit/refund should be applied against the tax
liabilities. the BIR, found no merit in Philex's position. pending claims have not yet been established or
determined with certainty, it follows that no legal compensation can take place. BIR reiterated its
demand that Philex settle the amount plus interest within 30 days from the receipt of the letter. Philex
raised the issue to the Court of Tax Appeals. CTA still ordered Philex to pay the remaining balance.
Court of Tax Appeals ruled that "taxes cannot be subject to set-off on compensation since claim for
taxes is not a debt or contract. Philex appealed the case before the Court of Appeals WHICH AFFIRMED
the CTA. Petitioner filed MR and denied.

a few days after the denial of its motion for reconsideration, Philex was able to obtain its VAT input
credit/refund not only for the taxable year 1989 to 1991 but also for 1992 and 1994. Philex now
contends that the same should, ipso jure, off-set its excise tax liabilities15 since both had already become
"due and demandable, as well as fully liquidated;"16 hence, legal compensation can properly take place.

that taxes cannot be subject to compensation for the simple reason that the government and the
taxpayer are not creditors and debtors of each other. 17 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

a taxpayer may not offset taxes due from the claims that he may have against the government.
Taxes cannot be the subject of compensation because the government and taxpayer are not
mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.

Issue:

W/N taxes can be subject to set off compensation

W/N Philex can refuse the payment of its tax liabilities on grounds pending claims for tax credit/ refund
Ruling:

We fail to see the logic of Philex's claim for this is an outright disregard of the basic principle in tax law
that taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance.24 Evidently, to countenance Philex's whimsical reason would render ineffective our tax
collection system. Too simplistic, it finds no support in law or in jurisprudence.

To be sure, we cannot allow Philex to refuse the payment of its tax liabilities on the ground that it has a
pending tax claim for refund or credit against the government which has not yet been granted. It must
be noted that a distinguishing feature of a tax is that it is compulsory rather than a matter of
bargain.25 Hence, a tax does not depend upon the consent of the taxpayer.

the fact that Philex has pending claims for VAT input claim refund wit the government is immaterial
for the imposition of charges and penalties prescribed under Section 248 and 249 of the Tax Code of
1977. The payment of the surcharge is mandatory and the BIR is not vested with any authority to waive
the collection thereof.28 The same cannot be condoned for flimsy reasons,29 similar to the one advanced
by Philex in justifying its non-payment of its tax liabilities.

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 public's trust and confidence in the Government this
power must be used justly and not treacherously.

it is a settled rule that in the performance of governmental function, the State is not bound by the
neglect of its agents and officers. Nowhere is this more true than in the field of taxation. 37 Again, while
we understand Philex's predicament, it must be stressed that the same is not a valid reason for the non-
payment of its tax liabilities.

To be sure, this is not to state that the taxpayer is devoid of remedy against public servants or
employees, especially BIR examiners who, in investigating tax claims are seen to drag their feet
needlessly. First, if the BIR takes time in acting upon the taxpayer's claim for refund, the latter can seek
judicial remedy before the Court of Tax Appeals in the manner prescribed by law. 38 Second, if the
inaction can be characterized as willful neglect of duty, then recourse under the Civil Code and the Tax
Code can also be availed of.

Art. 27 of the Civil Code provides:

Art. 27. Any person suffering material or moral loss because a public servant or employee
refuses or neglects, without just cause, to perform his official duty may file an action for
damages and other relief against the latter, without prejudice to any disciplinary action that
may be taken.ℒαwρhi ৷

More importantly, Section 269 (c) of the National Internal Revenue Act of 1997 states:

(c) Wilfully neglecting to give receipts, as by law required for any sum collected in the performance of
duty or wilfully neglecting to perform, any other duties enjoyed by law.

Simply put, both provisions abhor official inaction, willful neglect and unreasonable delay in the
performance of official duties.39 In no uncertain terms must we stress that every public employee or
servant must strive to render service to the people with utmost diligence and efficiency. Insolence and
delay have no place in government service. The BIR, being the government collecting arm, must and
should do no less. It simply cannot be apathetic and laggard in rendering service to the taxpayer if it
wishes to remain true to its mission of hastening the country's development. We take judicial notice of
the taxpayer's generally negative perception towards the BIR; hence, it is up to the latter to prove its
detractors wrong.

In sum, while we can never condone the BIR's apparent callousness in performing its duties, still, the
same cannot justify Philex's non-payment of its tax liabilities. The adage "no one should take the law
into his own hands" should have guided Philex's action.

WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED. The assailed decision
of the Court of Appeals dated April 8, 1996 is hereby AFFIRMED.
 8.ROXAS vs. CTA- MODIFIED
Facts:

Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary
succession the following properties: Agricultural lands in Nasugbu, Batangas; A residential house and Shares of
stocks in different corporations.

AGRICULTURAL LANDS

Tenants who tilled the lands in expressed their desire to purchase from Roxas y Cia. the parcels. The
Government persuaded the Roxas brothers to part with their landholdings. Roxas brothers agreed to sell 13,500
hectares to the Government for distribution to actual occupants .It turned out that the Government did not have
funds to cover the purchase price, and so a special arrangement was made for the Rehabilitation Finance
Corporation to advance to Roxas y Cia. Roxas y Cia. allowed the farmers to buy the lands for the same price but
by installment, and contracted with the Rehabilitation Finance Corporation to pay its loan from the proceeds of
the yearly amortizations paid by the farmers.

ASSESSMENTS

Commissioner of Internal Revenue demanded from Roxas y Cia the payment of real estate dealer's tax for 1952.
The assessment for real estate dealer's tax was based on the fact that Roxas y Cia. received house rentals from
Jose. Sec. 194 of the Tax Code, an owner of a real estate who derives a yearly rental income therefrom in the
amount of P3,000.00 or more is considered a real estate dealer and is liable to pay the corresponding fixed tax.

The Roxas brothers protested and was denied, they appeal in the Court of Tax Appeals. The Tax Court heard the
appeal sustaining the assessment except the demand for the payment of the fixed tax on dealer of securities and
the disallowance of the deductions for contributions to the Philippine Air Force Chapel and Hijas de Jesus' Retiro
de Manresa.

Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this Court.

Issue:

1) Is the gain derived from the sale of the Nasugbu farm lands an ordinary gain, hence 100% taxable?

(2) Are the deductions for business expenses and contributions deductible?

(3) Is Roxas y Cia. liable for the payment of the fixed tax on real estate dealers?

Ruling:

1. 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%.

Roxas y Cia. deducted from its gross income for tickets to a banquet and for San Miguel beer gifts. The deduction
were claimed as representation expenses. Representation expenses are deductible from gross income as
expenditures incurred in carrying on a trade or business under Section 30(a) of the Tax Code provided the
taxpayer proves that they are reasonable in amount, ordinary and necessary, and incurred in connection with
his business. In the case at bar, the evidence does not show such link between the expenses and the business of
Roxas y Cia. The findings of the CTA be sustained.

2. Christmas funds are not deductible for the reason they were not spent for public. Under Section 39(h), a
contribution to a government entity is deductible when used exclusively for public purposes.
disallowance must be sustained. On the other hand, the contribution to the Manila Police trust fund is an
allowable deduction for said trust fund belongs to the Manila Police intended to be used exclusively for
its public functions.

Philippines Herald's fund for Manila's neediest families were disallowed on the ground that the Philippines
Herald is not a corporation or an association contemplated in Section 30 (h) of the Tax Code. It should be noted
however that the contributions were not made to the Philippines Herald but to a group of civic spirited citizens
organized by the Philippines Herald solely for charitable purposes. There is no question that the members of this
group of citizens do not receive profits, for all the funds they raised were for Manila's neediest families. Such a
group of citizens may be classified as an association organized exclusively for charitable purposes mentioned in
Section 30(h) of the Tax Code.

The chapel in question has not been shown to belong to the Catholic Church or any religious organization. On the
other hand, the lower court found that it belongs to the Far Eastern University, contributions to which are not
deductible under Section 30(h) of the Tax Code for the reason that the net income of said university injures to
the benefit of its stockholders. The disallowance should be sustained.

3. Lastly, Roxas y Cia. questions the imposition of the real estate dealer's fixed tax upon it, because although
it earned a rental income it came from Jose Roxas, one of the partners. Section 194 of the Tax Code, in
considering as real estate dealers owners of real estate receiving rentals of at least P3,000.00 a year, does
not provide any qualification as to the persons paying the rentals. The law, which states:

. . . "Real estate dealer" includes any person engaged in the business of buying, selling, exchanging,
leasing or renting property on his own account as principal and holding himself out as a full or part-time
dealer in real estate or as an owner of rental property or properties rented or offered to rent for an
aggregate amount of three thousand pesos or more a year: . . . (Emphasis supplied) .

is too clear and explicit to admit construction. The findings of the Court of Tax Appeals or, this point is sustained.

WHEREFORE, the decision appealed from is modified. Roxas y Cia. is hereby ordered to pay the sum of P150.00
as real estate dealer's fixed tax for 1952, and Antonio Roxas, Eduardo Roxas and Jose Roxas are ordered to pay
the respective sums of P109.00, P91.00 and P49.00 as their individual deficiency income tax all corresponding
for the year 1955. No costs. So ordered.

10.CIR VS. LINGAYEN GULF ELECTRIC POWER

respondent taxpayer, Lingayen Gulf Electric Power Co., Inc., operates an electric power plant serving the
adjoining municipalities of Lingayen and Binmaley, both in the province of Pangasinan, pursuant to the
municipal franchise granted it by their respective municipal councils, President of the Philippines approved the
franchises granted.

(BIR) assessed against and demanded from the private respondent AN AMOUNT representing deficiency
franchise taxes and surcharges for the years 1946 to 1954 applying the franchise tax rate of 5% on gross
receipts from March 1, 1948 to December 31, 1954 as prescribed in Section 259 of the National Internal Revenue
Code, instead of the lower rates as provided in the municipal franchises. respondent requested for a
reinvestigation of the case on the ground that instead of incurring a deficiency liability, it made an overpayment
of the franchise tax. BIR denied the private respondent's request for reinvestigation and reiterated the demand
for payment of the same., the private respondent protested the said assessment and requested for a conference
with a view to settling the liability amicably. Commissioner denied. Respondent APPEAL Court of Tax Appeals.

Pending the hearing of the said cases, Republic Act (R.A.) No. 3843 was passed on June 22, 1 963, granting to the
private respondent a legislative franchise for the operation of the electric light, heat, and power system in the
same municipalities of Pangasinan. CTA ruled RA 3843 to apply and CIR claim be dismissed.

Issue:

1. Whether or not the 5% franchise tax prescribed in Section 259 of the National Internal Revenue Code assessed
against the private respondent on its gross receipts realized before the effectivity of R.A- No. 3843 is collectible.

2. Whether or not Section 4 of R.A. No. 3843 is unconstitutional for being violative of the "uniformity and
equality of taxation" clause of the Constitution.

3. If the abovementioned Section 4 of R.A. No. 3843 is valid, whether or not it could be given retroactive effect so
as to render uncollectible the taxes in question which were assessed before its enactment.

4. Whether or not the respondent taxpayer is liable for the fixed and deficiency percentage taxes in the amount
of P3,025.96 for the period from January 1, 1946 to February 29, 1948, the period before the approval of its
municipal franchises.

Ruling:

1. no merit in petitioner's contention. R.A. No. 3843 granted the private respondent a legislative franchise
in June, 1963, amending, altering, or even repealing the original municipal franchises, and providing that
the private respondent should pay only a 2% franchise tax on its gross receipts, "in lieu of any and all
taxes and/or licenses of any kind, nature or description levied, established, or collected by any authority
whatsoever, municipal, provincial, or national, now or in the future ... and effective further upon the date
the original franchise was granted, no other tax and/or licenses other than the franchise tax of two per
centum on the gross receipts ... shall be collected, any provision of law to the contrary notwithstanding."
Thus, by virtue of R.A- No. 3843, the private respondent was liable to pay only the 2% franchise tax,
effective from the date the original municipal franchise was granted.

2. A tax is uniform when it operates with the same force and effect in every place where the subject of it is
found. Uniformity means that all property belonging to the same class shall be taxed alike The
Legislature has the inherent power not only to select the subjects of taxation but to grant exemptions.
Tax exemptions have never been deemed violative of the equal protection clause. 1 1 It is true that the
private respondents municipal franchises were obtained under Act No. 667 2 of the Philippine
Commission, but these original franchises have been replaced by a new legislative franchise, i.e. R.A. No.
3843. we find no reason to disturb the respondent court's ruling upholding the constitutionality of the
law in question.

3. In the instant case, Act No. 3843 provides that "effective ... upon the date the original franchise was
granted, no other tax and/or licenses other than the franchise tax of two per centum on the gross
receipts ... shall be collected, any provision to the contrary notwithstanding." Republic Act No. 3843
therefore specifically provided for the retroactive effect of the law.

4. The legislative franchise (R.A. No. 3843) exempted the grantee from all kinds of taxes other than the 2%
tax from the date the original franchise was granted. The exemption, therefore, did not cover the period
before the franchise was granted, i.e. before February 24, 1948. However, as pointed out by the
respondent court in its findings, during the period covered by the instant case, that is from January 1,
1946 to December 31, 1961, the private respondent paid the amount of P34,184.36, which was very
much more than the amount rightfully due from it. Hence, the private respondent should no longer be
made to pay for the deficiency tax in the amount of P3,025.98 for the period from January 1, 1946 to
February 29, 1948.

WHEREFORE, the appealed decision of the respondent Court of Tax Appeals is hereby AFFIRMED. No
pronouncement as to costs. SO ORDERED.
 13. LUZON STEVEDORING CORP VS. CTA- PETITION DENIED CTA AFFIRMED
Facts:

Petitioner for the repair and maintenance of its tugboats, imported various engine parts and other equipment for
which it paid, under protest, the assessed compensating tax. Unable to secure a tax refund from the CIR. It filed
petition for review with CTA that it be granted the refund. The CTA denied the various claims for tax refund.

Petitioner contends that tugboats are embraced and included in term cargo vessel under tax exemption
provisions of section 190 of Revenue Code. It includes that engines, spare parts and equipment imported by it
and use in repair and maintenance of its tugboats are exempt from compensating tax.

On the other hand Respondents argued that tugboats are not cargo vessel because they are neither designed nor
used for carrying and transporting persons or goods by themselves but are mainly employed for towing and
pulling purposes.

Issue:

W/N petitioner tugboats can be interpreted to be included in the term cargo vessels for purposes of the tax
exemption provided for in section 190 of National Internal Revenue Code as amended by RA No. 3176.

Ruling:

The court laid down the rule that as the power of taxation is a high prerogative of sovereignty, the
relinquishment is never presumed and any reduction or dimunition thereof with respect to its mode or its rate,
must be strictly construed, and the same must be coached in clear and unmistakable terms in order that it may
be applied. The general rule is that any claim for exemption from the tax statute should be strictly construed
against the taxpayer

As pointed out by the Court of Tax Appeals, the amendatory provisions of Republic Act No. 3176 limit tax
exemption from the compensating tax to imported items to be used by the importer himself as operator of
passenger and/or cargo vessel. Petitioner's tugboats clearly do not fall under the categories of passenger and/or
cargo vessels.

The Court of Tax Appeals found that no evidence was adduced by petitioner-appellant that tugboats are
passenger and/or cargo vessels used in the shipping industry as an independent business. On the contrary,
petitioner-appellant's own evidence supports the view that it is engaged as a stevedore, that is, the work of
unloading and loading of a vessel in port; and towing of barges containing cargoes is a part of petitioner's
undertaking as a stevedore. In fact, even its trade name is indicative that its sole and principal business is
stevedoring and lighterage, taxed under Section 191 of the National Internal Revenue Code as a contractor, and
not an entity which transports passengers or freight for hire which is taxed under Section 192 of the same Code
as a common carrier by water.

14. BORJA vs. GELLA- DECISION REVERESED PETITION FOR MANDAMUS DISMISSED INJUNCTION
IS LIFTED.
Facts:

Jose de Borja has been delinquent in the payment of his real estate taxes since 1958 . 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.

Issue:
 a. W/N appellee has 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. W/N 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.

Ruling:

a. Section 2 of Republic Act No. 304- 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.

., 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.

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.
 16. LUTZ VS. ARANETA- PETITION AFFIRMED
Facts:

Court of First Instance of Negros Occidental to test the legality of the taxes imposed by Commonwealth Act No.
567, otherwise known as the Sugar Adjustment Act. In section 2, Commonwealth Act 567 provides for an
increase of the existing tax on the manufacture of sugar, on a graduated basis, on each picul of sugar
manufactured; while section 3 levies on owners or persons in control of lands devoted to the cultivation of sugar
cane and ceded to others for a consideration, on lease or otherwise —

a tax equivalent to the difference between the money value of the rental or consideration collected and
the amount representing 12 per centum of the assessed value of such land.

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma,
seeks to recover from the Collector of Internal Revenue the sum of P14,666.40 paid by the estate as taxes, under
section 3 of the Act, for the crop years 1948-1949 and 1949-1950; alleging that such tax is unconstitutional and
void, being levied for the aid and support of the sugar industry exclusively, which in plaintiff's opinion is not a
public purpose for which a tax may be constitutioally levied. The action having been dismissed by the Court of
First Instance, the plaintifs appealed the case directly to this Court

The basic defect in the plaintiff's 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. Hence it was competent for the legislature to find that the general welfare demanded that the sugar
industry should be stabilized in turn; and in the wide field of its police power, the lawmaking body could provide
that the distribution of benefits therefrom be readjusted among its components to enable it to resist the added
strain of the increase in taxes that it had to sustain.

Issue:

W/N the tax imposition in the Commonwealth Act No. 567 is unconstitutional.

Ruling:

Yes, the Supreme Court held that the fact that sugar production is one of the greatest industry of our
nation, sugar occupying a leading position among its export products; that it gives employment to
thousands of laborers in the fields and factories; that it is a great source of the state's wealth, is one of
the important source of foreign exchange needed by our government and is thus pivotal in
the plans of a regime committed to a policy of currency stability. Its promotion, protection
and advancement, therefore redounds greatly to the general welfare. Hence it was competent for the
legislature to find that the general welfare demanded that the sugar industry be stabilized in turn; and
in the wide field of its police power, the law-making body could provide that the distribution of benefits
therefrom be readjusted among its components to enable it to resist the added strain of the increase in
taxes that it had to sustain.

The subject 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 a valid exercise of
police power.

19. GARCIA VS. EXECUTIVE SUMMARY- DISMISSED

President issued Executive Order No. 438 which imposed, in addition to any other duties, taxes and charges
imposed by law on all articles imported into the Philippines, an additional duty of five percent (5%) ad valorem.
This additional duty was imposed across the board on all imported articles, including crude oil and other oil
products imported into the Philippines. This additional duty was subsequently increased from five percent
(5%) ad valorem to nine percent (9%) ad valorem by the promulgation of Executive Order No. 443, dated 3
January 1991.

Department of Finance requested the Tariff Commission to initiate the process required by the Tariff and
Customs Code for the imposition of a specific levy on crude oil and other petroleum products, Tariff Commission,
following the procedure set forth in Section 401 of the Tariff and Customs Code, scheduled a public hearing to
give interested parties an opportunity to be heard and to present evidence in support of their respective
positions.

Executive Order No. 475 was issued by the President, on 15 August 1991 reducing the rate of additional duty on
all imported articles from nine percent (9%) to five percent (5%) ad valorem, except in the cases of crude oil and
other oil products which continued to be subject to the additional duty of nine percent (9%) ad valorem.

AFTER hearings, the Tariff Commission submitted to the President for consideration and appropriate action.
Seven (7) days later, the President issued Executive Order No. 478 which levied a special duty of P0.95 per liter
or P151.05 per barrel of imported crude oil and P1.00 per liter of imported oil products.

He contends that since the Constitution vests the authority to enact revenue bills in Congress, the
President may not assume such power by issuing Executive Orders Nos. 475 and 478 which are in the
nature of revenue-generating measures.

Issue:

W/N Executive Orders Nos. 475 and 478 is valid

Ruling:

Turning first to the question of constitutionality, under Section 24, Article VI of the Constitution, the enactment
of appropriation, revenue and tariff bills, like all other bills is, of course, within the province of the Legislative
rather than the Executive Department. It does not follow, however, that therefore Executive Orders Nos. 475 and
478, assuming they may be characterized as revenue measures, are prohibited to the President, that they must
be enacted instead by the Congress of the Philippines. Section 28(2) of Article VI of the Constitution provides as
follows:

(2) The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations
and restrictions as it may impose, tariff rates, import and export quotas, tonage and wharfage dues, and other
duties or imposts within the framework of the national development program of the Government.

Accordingly, we believe and so hold that Executive Orders Nos. 475 and 478 which may be conceded to be
substantially moved by the desire to generate additional public revenues, are not, for that reason alone, either
constitutionally flawed, or legally infirm under Section 401 of the Tariff and Customs Code. Petitioner has not
successfully overcome the presumptions of constitutionality and legality to which those Executive Orders are
entitled. 7

The conclusion we have reached above renders it unnecessary to deal with petitioner's additional contention
that, should Executive Orders Nos. 475 and 478 be declared unconstitutional and illegal, there should be a roll
back of prices of petroleum products equivalent to the "resulting excess money not be needed to adequately
maintain the Oil Price Stabilization Fund (OPSF)." 8

WHEREFORE, premises considered, the Petition for Certiorari, Prohibition and Mandamus is hereby DISMISSED
for lack of merit. Costs against petitioner.