tax syllabus and digests

8/9/2019 Tax Syllabus and Digests

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V. Construction of Tax Laws

A. General Rules of Construction of Tax LawsLuzon Stevedoring v Trinidad, 43 Phil 803 (1922)

Recovery of CIR from LS P2,422.81 percentage tax from

the gross receipts of the business. LS paid under protest.

CFI judge, against CIR holding that LS is not a contractor.Business was loading and unloading cargo from vessels

in port at certain rates of charge per unit cargo. Direct

supervision of officers of the ships and under instruction

by captain and officers of the ship.

Issue: WON LS is a contractor

Held: No.

Definition of lexicographers cannot always be adopted

as correct meaning for statutory words and phrases. Theintention and the object which it intended to attain

must be taken into consideration for the purpose of

determining the meaning of words and phrases.

Revenue laws imposing taxes on business must be

strictly construed in favor of the citizen.

If one rendering service submits himself to the direction

of the employer as to the details of the work, not merely

as to the result but also to the means by which that

result is to be attained=servant and is not a contractor in

respect to that work.

If engaged under a contract in an independent

operation, not subject to the direction and control of his

employer=contractor and contractee relationship.

If the question presented in the interpretation of a tariff

law is one of doubt, the doubt would be resolved in

favor of the importer, as duties are never imposed upon

citizens upon vague and doubtful interpretation.

True test of a contractor: He renders the service in the

course of an independent occupation, representing thewill of his employer only as to the result of his work, and

not as to the means by which it is accomplished.

Disposition: Plaintiff not a contractor in the sense that

that word is used in section 1462 of Act 2711 and

therefore tax paid under protest was illegally collected

and should be repaid.

Lorenzo vs Posada 64 Phil 803 (1937)

Oct 4, 1932 Lorenzo brought action to CFI for refund of

the inheritance tax he paid for the estate of Thomas

Hanley and for the collection of interest thereon at 6%

from Sept. 1934 when he paid it under protest.

May 27, 1922 Thomas Hanley died with will. No

disposal for 10 years. Given to nephew Matthew. CFIconsidered it proper to appoint a trustee to administer

the real properties. PJM Moore, one of the two

executors was appointed trustee. Moore took oath of

office and gave bond on March 10, 1924 and resigned

on Feb 29, 1932, and this is when Lorenzo took his

stead.

CIR collected inheritance tax from July 1, 1931 to the

date o payment (Sept. 1934). CFI in favor of CIR.

Issue: WON real property passed to instituted heir fromthe moment of death and thus, inheritance tax must be

paid from that date and not after 10 years as stated in

the will.

Held: The accrual of the inheritance tax is distinct from

the obligation to pay the same. The tax is upon

transmission or the transfer or devolution of property of

a decedent, made effective by his death. It is in reality

an exercise or privilege tax imposed on the right to

succeed to, receive, or take property by or under a will

or the intestacy law, or deed, grant of girt to become

operative at or after death. Art. 667, rights to the

succession of a person are transmitted from the

moment of his death.

The authentication of a will implies its due execution but

once probated and allowed the transmission is effective

as of death of the testator in accordance with Art. 657 o

the CC. Whatever may be the time when actual

transmission of the inheritance takes place, succession

takes place in any event at the moment of the

decedents death.

Thomas died on May 27, 1922, inheritance tax accrued

as of that date. But it does not follow that the obligation

to pay the tax arose as of that date. Sec. 1543 of Act.

3031 and sec. 1544(b) shall apply. In other cases, within

the six months subsequent to the death of the

predecessor; but if judicial testamentary or intestate

proceedings shall be instituted prior to the expiration of

the said period, the payment shall be made by the

executor or administrator before delivering to each

beneficiary his share.


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If death is the generating source from which the power

of the state to impose inheritance taxes takes its being

and if, upon the death of the decedent, succession takes

place and the right of the state to tax vests instantly, the

tax should be measured by the value of the estate as it

stood at the time of the decedents death, regardless of

any subsequent contingency affecting value or any

subsequent increase/decrease in value.

A trustee is entitled to receive a fair compensation for

his services. But from this it does not follow that the

compensation due him may lawfully be deducted in

arriving at the net value of the estate subject to tax.

There is no statute in the Phil which requires trustees

commissions to be deducted in determining the net

value of the estate subject to inheritance tax.

Inheritance taxation is governed by the statue in force at

the time of the death of the decedent. A statute shouldbe considered as prospective in its operation, whether it

enacts, amends, or repeals an inheritance tax, unless the

language of the statue clearly demands or expresses

that it shall have a retroactive effect.

Liability to pay tax may arise at a certain time and the

tax may be paid within another given time. The mere

failure to pay ones tax does not render one delinquent

until and unless the entire period has elapsed within

which the taxpayer is authorized by law to make such

payments without being subjected to the payment of

penalties for failure to pay his taxes within the

prescribed period.

The mere fact that the estate of the deceased was

placed in trust did not remove it from the operation of

our inheritance tax law or exempt it from the payment

of the inheritance tax. The corresponding inheritance

tax should have been paid on or before March 10, 1924,

to escape the penalties of the law. This is so for the

reason already stated that the delivery of the estate to

the trustee was in esse delivery of the same estate to

the cestui que trust, the beneficiary in this case.

On the case of Lim Co Chui vs Posadas, the fact that riots

prevented the plaintiffs from paying their internal

revenue tax on time does not authorize the CIR to

extend time prescribed for the payment and to accept

them without the additional penalty. Modes adopted to

enforce the taxes levied should be interfered with as

little as possible.

Umali v Estanislao (Sec. of Finance) 209 SCRA 446

(1992)

Mandamus and prohibition. RA 7167: Adjusting the

basic personal and additional exemptions allowable to

individuals for income tax purposes to the poverty

threshold level. Act was approved and published by

President on Dec. 19, 1991 and published on Jan 14,1992. On Dec 26, 1991, respondents promulgated IRR.

IRR states that right to claim the exemptions shall be

allowed with respect to compensation paid on or after

Jan. 1, 1992.

The petitions were filed both in Feb 1992 to compel the

CIR to implement the mandate of the law, adjusting the

personal and additional exemptions.

Issues: WON RA 7167 took effect on approval or after 15

days from publication and if after 15 days, WON coversto compensation income earned or received during the

calendar year 1991.

Held: 15 days after publication or on Jan. 30, 1992. Yes

applies to compensation income earned in 1991.

Tanada vs Tuvera: Publication is indispensable in every

case but the legislature may in its discretion provide that

the usual 15 day period be shortened or extended.

1991: Sec. 29 (L) of No. 4 of the NIRC: Upon the

recommendation of the Sec of Finance, the President

shall automatically adjust not more often than once

every three years, the personal and additional

exemptions taking into account, among others, the

movement in consumer price indices, levels of minimum

wages, and bare subsistence levels.

It may have been adjusted in 1989 but the President did

not adjust.

But it may be observed that RA 7167, speaks of the

adjustments that it provides for, as adjustments to thepoverty threshold level. This is certainly at the time RA

7167 was enacted by Congress and not poverty

threshold levels in future, at which time there may be

need of further adjustments in personal exemptions.

Congress cannot lose sight of the fact that these

exemptions are fixed amounts to which an individual

taxpayer is entitled. This is a social legislation to alleviate

in part the present economic plight of the lower income

taxpayers.


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Since RA 7167 was effective on Jan 30, 1992, the

increased exemptions are literally available on or before

April 15, 1992( though not before January 30, 1992). But

these increased exemptions can be available on April 15,

1992 only in respect of compensation income earned or

received during the calendar year 1991.

As regards IRR which defers to 1993 the reduction of

governmental tax revenues which irresistibly followsfrom the application of RA 7167. But the law-making

authority has spoken and the Court can not refuse to

apply the law-makers words. Whether or not the

government can afford the drop in tax revenues

resulting from such increased exemptions was for

Congress (not this Court) to decide.


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In our withholding tax system, possession is acquired by

the payor as the withholding agent of the government,

because the taxpayer ratifies the very act of possession

for the government. The process o bookkeeping and

accounting for interest on deposits and yield on deposit

substitutes that are subjected to FWT are indeedfor

legal purposestantamount to delivery, receipt or

remittance.

RR 12-80 superseded by RR 17-84.

Pertinent to the title to which this case presently under

(Construction of Tax Laws):

General Rule: Rules and regulations issued by

administrative or executive officers pursuant to the

procedure or authority conferred by law upon the

administrative agency have the force and effect, or

patake the nature, of a statute. The reason is that

statues express the policies, purposes, objectives,remedies and sanctions intended by the legislature in

general terms.

Details and manner of carrying them out=left to the

administrative agency entrusted with their enforcement.

Here it is the finance secretary who promulgates the

revenue regulations, upon the recomm of the BIR

Comm.

A revenue regulation is binding on the courts as long as

the procedure fixed for its promulgation is followed.

Regulation must be:

a) Germane to the object and purpose of the lawb) Not contradict, but conform to, the standards

the law prescribes;

c) Be issued for the sole purpose of carrying intoeffect the general provisions of our tax laws.

Repeal=express or implied.

Express-declaration in a regulation, that another

identified regulation, is repealed.

Implied=all others.

Two categories of implied repeals:

a. In case the provisions are in irreconcilableconflict, the later regulation, to the extent of the

conflict, constitutes an implied repeal of an

earlier one

b. If the later regulation covers the whole subjectof an earlier one and is clearly intended as a

substitute.

Where a part of an earlier regulation embracing the

same subject as a later one may not be enforced

without nullifying the pertinent provision of the latter,

the earlier regulation is deemed impliedly amended or

modified to the extent of the repugnancy.

Manila Jockey Club case inapplicable-earmarking is not

the same as withholding. Amounts earmarked do not

form part of gross receipts, because, although delivered

or received, these are by law or regulation reserved or

some person other than the taxpayer. On the contrary,

amounts withheld form part of gross receipts, because

these are in constructive possession and not subject to

any reservation, the withholding agent being merely a

conduit in the collection process.

It is ownership that determines whether interest income

forms part of taxable gross receipts. Being originally

owned by these financial institutions as part of their

interest income, the FWT should form part of their

taxable gross receipts. The amounts withheld are part of

an income tax liability which is different from a

percentage tax liability.

In the construction and interpretation of tax statutes

and of statues in general, the primary consideration is to

ascertain and give effect to the intention of the

legislature. We ought to impute to the lawmaking body

the intent to obey the constitutional mandate, as long as

its enactments fairly admit of such construction. In fact,

no tax can be levied without express authority of law,

but the statutes are to receive a reasonable construction

with a view to carrying out their purpose and intent.

Sec. 24(e) imposes income tax while Sec. 119 imposes

percentage tax. The legislature intended two different

taxes. FWT is on passive income, GRT is on business.

Withholding of one is not equivalent to the payment of

the other.

Taxing act will be construed and the intent and meaning

of the legislature ascertained, from its language. Its

clarity and implied intent must exist to uphold the taxes

as against a taxpayer in whose favor doubts will be

resolved. No process of interpretation or construction

need be resorted to where a provision or law

peremptorily calls for application. A literal application of

any part of a statute is to be rejected if it will operate

unjustly, lead to absurd results, or contradict the eviden

meaning of the statue taken as a while.


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Tax refunds are in the nature of tax exemptions. These

are strictly construed against the taxpayer. They must be

able to point to some positive provision, not merely a

vague implication, of the law creating that right.

Respondent has not been able to satisfactorily show that

its FWT on interest income is exempt from the GRT. No

exemptions are normally allowed when a GRT isimposed. It is precisely designed to maintain simplicity in

the tax collection effort of the government and to assure

its steady source of revenue even during an economic

slump.

No Double Taxation. DT means taxing the same property

twice when it should be taxed only once i.e. taxing the

same person twice by the same jurisdiction for the same

thing .

Direct Duplicate Taxation = two taxes must be imposeda. on the same subject matterb. for the same purpose,c. by the same taxing authority,d. within the same jurisdiction,e. during the same taxing period, andf. they must be of the same kind or character.

Taxes imposed here are on two different subject matter.

FWT=passive income GRT=privilege of engaging in the

business of banking.

A tax based on receipts is a tax on business rather than

on the property; hence it is an excise rather than a

property tax.

Collector vs La Tondena, 5 SCRA 665 (1962)

LT is engaged in the business of manufacturing wines

and liquor with a distillery in Manila. It purchases

alcohol from Negros Occidental and from Batangas and

has been removing this alcohol from the centrals to resp

distillery under joint bonds without prepayment ofspecific taxes. Quantity of alcohol purchased and

received-entered into the BIR Official Register Books.

In the manufacture of Manila Rum, LR uses as basic

materials low test alcohol, purchased in crude form from

the suppliers which it re-rectifies or subjects to further

rectification or distillation==from this process, losses

through evaporation incurs, for which CIR had given resp

allowance of not exceeding 7% for said losses.

In May 1954, CIR wrote demand letter to LT for payment

of specific taxes on alcohol lost by evaporation thu re-

rectification or re-distillation from June 1950 to Feb

1954. LT protested and CIR refused to reconsider the

assessment. LT appealed to the Conference Staff of the

BIR. It was ordered to comply with DOF 213 to deposit

of the amount in cash and the balance by a surety bond.

LT action to CTA. CTA ordered LT to pay P672.15 by wayof specific tax. The amount of P154K which corresponds

to the period after January 1951 and up to Feb. 1954,

pursuant to RA 592=LT is exempt from liability assessed

therefor.

CIR appealed to SC.

Issue: WON LT should pay the specific tax.

Held: No.

Sec. 133 of the Tax code states liability shall attach to

the susbstance as soon as it is in existence as such,

whether it be subsequently separated as pure or impure

spirits. However RA 592 took effect on Jan. 1, 1951

which amended 133 deleting the all embracing clause

which subjects to tax all kinds of alcoholic substances

but only distilled spirits as finished products. This is in

harmony with Sec. 129 of the Tax code which states that

only the finished product is subject.

August 1956, RA 1608 was passed restoring the same

clause which was eliminated. From Jan. 1951 to Aug.

1956, the tax on alcohol did not attach as soon as it was

in existence as such but on the finished product.

In every case of doubt, tax statues are construed most

strongly against the government and in favor of the

citizens, because burdens are not to be imposed beyond

what the statutes expressly and clearly import. The new

law should not be given retroactive effect.


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B. Mandatory vs Directory ProvisionsSerafica vs Treasurer of Ormoc City 27 SCRA 110 (1969)

Ormoc City issued an ordinace imposing a tax of P5 for

every 1,000 board feet of lumber SOLD in Ormoc city.

Treasurer of Ormoc City levied on and collected from

Serafica Sawmill P1,837.84 for the lumber sold during1964. Lower court upheld validity of ordinance.

Issue:

a. WON Charter of Ormoc authorizes itself only toregulate and not tax.

b. WON it is double taxation = business + salec. WON tax is unfair, unjust, arbitrary

unreasonable, and oppressive

d. WON public was not heard.Held:

a. No. Local Autonomy is broad and sufficientlyplenary.

b. Regulation and taxation are different.Regulation part of police power. Taxation is not.

Double taxation is not prohibited in the country.

c. Imposition of tax is regardless of the class oflumber sold. No means to ascertain accuracy of

conclusion since pet did not present proof that

they must have different prices.

d. In the enactment of tax ordinances under LocalAutonomy, where practicable, public hearing be

held wherein the views of the public MAY be

heard.

This is just a mere suggestion, not obligatory,

such that failure can not and does not affect

validity of the tax ordinance.

Taxes are imposed on the sale and not on the

lumber or the business.

Roxas vs Rafferty 37 Phil 958 (1918)

Plaintiffs own a parcel of land in Escolta Manila. In 1913,

the improvements on this land were demolished and the

construction of a concrete building was begun. No taxes

on the improvements were levied or paid in 1914 as

adjudged by the CFI since the improvements were not

finished. It was finished in all respects on Feb. 15, 1915.

City assessor and collector of Manila, on Dec. 1, 1914,

sent notice to declare the improvements for assessment

for 1915. In Nov 1914, the assessor and collector had

the building inspected and assessed for tax at P3,000.

Plaintiffs paid under protest on June 30, 1915. Plaintiffs

filed in CFI to recover with interest.

Issue: WON the improvement is subject to tax.

The charter of Manila provides that within a period of

sixty days next succeeding the completion of such

acquisition, construction or addition, a sworndeclaration setting forth the value of the real estate

acquired or the improvement constructed and

containing a description to enable the city assessor and

collector to readily identify the same.

Plaintifs were under obligation to present within 60 days

from completion, or before April 15, 1915. Under an

attempted assessment in Novemeber and December,

they could have had no opportunity to comply with the

same.

Charter provides also that city assessor and collecter,

shall, during the first 15 days of December of each year,

add to his list of taxable real estate in the city the value

of improvements placed upon such property during the

preceding year. Bet December 1 to Dec. 15, the assessor

and collector was under obligation of adding the

improvements on the Roxas property and not between

Dec 1 to Dec 15 1914.

Common sense construction would be that the phrase

includes December of the previous year and the current

year up to December. The assessor and collector

perforce could not in 1914 levy a tax on incomplete

improvements made during the current year.

Charter provides that notice by publication is to be

made. Further, city has to notify in writing by delivering

or mailing such notification to person sometime in

November.

When the regulations prescribed are intended for the

protection of the citizen and to prevent a sacrifice of his

property, and by a disregard of which his right might be,and generally would be injuriously affected, they are not

directory but mandatory.

Sometimes statues requiring the assessor to notify the

taxpayer have been held to be merely directory. But in

the majority of the jurisdiction this requirement is held

to be mandatory, so that the assessor cannot make a

valid assessment unless he has given proper notice.


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Pecson vs CA 222 SCRA 580

Pecson filed complaint to annul sale at a public auction

of petitioners property for non-payment of real estate

taxes alleging sale was made without prior notice to

him. Sale was made without proper notice to him. He

further alleged that he was not notified of his right to

redeem the property.

Issue: Validity of public auction of his property for non-

payment of taxes on the ground that the notices to him

were sent to the wrong postal address.

Held: Valid sale.

Notices were sent to 79 Paquita St. Manila. Final Notice

to exercise right of redemption also sent to the same

address. He admits he no longer reside in Manila and

presently resides in QC but his contention is that the

notices should have been sent to 1009 Paquita and notto 79. If the notices were sent to 1009 Paquita, the new

owners of the house would send him the letters as they

always have.

Court: You maggot. As property owner and school

teacher at that, you hould know that if an owner fails to

pay the real estate taxes on a property, the said

property shall be sold at public auction to recover the

delinquent taxes.

In the records of the Office of the City Treasurer of QC,

below 1009 was the number 79. One can deduce that

the taxpayer had transferred his residence to 79. Worse,

pet introduced improvements without reporting the

same for tax purposes.

Issue on the compliance with the posting of the notices

and announcement of the sale, is a question of fact,

which this Court will not inquire into and review the

evidence relied upon the lower courts to support their

finding.

C. Application of Tax LawsArt. 2. Laws shall take effect after fifteen days following

the completion of their publication in the Official

Gazette, unless it is otherwise provided. This Code shall

take effect one year after such publication. (1a)

CIR vs CA GR 119761 (1996)

Foreign Tobacco- engaged in the manufacture of

different brands of cirgarettes. In a letter in Jan 1987,

then CIR to PCGG, its initial position was to classify

Champion, Hope, More as foreign brands.

On June 10, 1993, RA 7654 was enacted which imposed

excise taxes on cigarettes.

About a month after the enactment and two days

before the effectivity, BIR issued RMC 37-93 which

reclassified certain cigarettes subject to excise tax

reclassifying Hope, More, Champion as foreign brands

for purposes of determining the ad valorem tax.

On July 2, 1993, BIR Deputy Comm sent via fax a copy of

the RMC but it was not addressed to no one in

particular. On July 15,l 1993, FT received by ordinary

mail a certified Xerox copy of the RMC.

FT appealed to the appellate division of the BIR but

denied. On July 30, it was assessed for ad valorem tax

which amounted to P9M.

FT petition for review with the CTA. CTA upheld position

of FT, ad valorem is invalid, defective, and

unenforceable.

Issue: WON RMC 37-93 is discriminatory since it applies

not to all locally manufactured cigarettes similarly

situated.

Held: Discriminatory.

Petitioner opines that RMC is merely an interpretative

ruling of the BIR which can thys becme effective without

any prior need for notice and hearing nor publication

and that its issuance is not discriminatory since it would

apply under similar circumstances to all locally

manufactured cigarettes.

Legislative rule vs Interpretative rule

Legislative rule: in the nature of subordinate legislation

designed to implement a primary legislation by

providing the details thereof. It is generally required that

before a legislative rule is adopted there must be

hearing. In fixing of rate, no rule or final order shall be

valid unless the proposed rates shall have been

published in a newspaper of general circulation.


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Interpretative rules: designed to provide guidelines to

the law which the administrative agency is in charge o

enforcing.

When an administrative rule is merely interpretative in

nature, its applicability needs nothing further than its

bare issuance for it gives no real consequence more

than what the law itself has already prescribed. When

the administrative rule goes beyond merely providingfor the means that can facilitate or render least

cumbersome the implementation of the law but

substantially adds to or increases the burden of those

governed, it behooves the agency to accord at least to

those directly affected a chance to be heard, and

thereafter to be duly informed, before that new

issuance is give the force and effect of law.

The cigarettes in the case at the time of the effectivity of

the law were not classified as foreign brands and were

subject to 45% ad valorem tax. Without the RMC, therewill be no new tax rate consequence on private resp

products.

BIR did not simply interpret the law. It legislated under

its quasi-legislative authority.

Art. VI, Sec. 28 of the Consti mandates taxation to be

uniform and equitable. Uniformity requires that all

subjects or objects of taxation, similarly situated, are to

be treated alike or put on equal footing both in

privileges and liabilities. All taxable articles or kinds of

property of the same class must be taxed at the same

rate, and the tax must operate with the same force and

effect in every place where the subject may be found.

RMC was hastily promulgated and has fallen short of a

valid and effective administrative issuance.


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CIR vs Telefunken, 249 SCRA 401 (1995)

CIR vs Michel Lhuillier GR 150947

CIR vs Benguet GR 134587

VI. Exemption from Taxation

A. In GeneralGreenfield vs Meer 77 Phil 394

Basco vs PAGCOR

CIR vs Botelho Shipping Corp 20 SCRA 487


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CIR vs CTA, GCL Retirement Plan 207 SCRA 487

CIR vs Guerrero 21 SCRA 180

Phil Acetylene vs CIR 20 SCRA 1056

Maceda vs Macaraig Jr 197 SCRA 771

Sea-Land Service vs CA 357 SCRA 441

Davao Gulf vs CIR GR 117359


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PLDT vs Davao City GR 143867

B. Compared with Other TermsTax Remission/CondonationSurigao Con. Min vs Colletor 9 SCRA 728

Tax Amnesty

PD 370

EO 399; BIR Revenue Regulations No. 6-2005 and 10-

2005

CIR vs CA 240 SCRA 368

CIR vs Marubeni GR 137377

Exclusion/Deduction

Sec. 32 (B) NIRC

Sec. 34 NIRC

C. Construction of Tax ExemptionsRodriguez Inc vs Collector 28 SCRA 119

Republic Flour Mills vs CIR 31 SCRA 148


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Wondering Mechanical Engineering v CTA 64 SCRA 555

Luzon Stevedoring vs CTA

Floro Cement v Hen Gorospe

CIR vs Ledesma

Resins In vs Auditor General 25 SCRA 754CI

CIR vs CA GR 124043


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Misamis Oriental Asso vs DOF 238 SCRA 63

Nestle Phils vs CA GR 134114

Coconut Oil Refiners vs Torres GR 132527

Maceda vs Macaraig 196 SCRA 771

Maceda vs Macaraig 223 SCRA 217

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