Petitioner COMMISSIONER OF INTERNAL REVENUE,
Responden ALGUE, INC., and THE COURT OF TAX APPEALS
t
Topic Definition of tax
Doctrine Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government
itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
Facts January 14, 1965-Algue domestic corporation engaged in engineering, construction
and other allied activities received a letter from the petitioner assessing it in the total
amount of P83, 183.85 as delinquency income taxes for the years 1958 and 1959.
January 18, 1965- Algue flied a letter of protest or request for reconsideration, which
was stamp received on the same day in the office of the CIR.
March 12, 1965-a warrant of distraint and levy was presented to the private
respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it
on the ground of the pending protest. But later on it was received by Atty. Guevarra
after it was informed of the said inaction of their protest from CIR.
April 23, 1965-Algue filed a petition for review of the decision of the Commissioner
of Internal Revenue with the Court of Tax Appeals. It maintained that the CIR is not
correct in their notice of delinquency of income tax.
Defense of CIR
Contends that the claimed deduction of P75, 000.00 was properly disallowed because
it was not an ordinary, reasonable or necessary business expense.
Algue received as agent commission of P125, 000.00, and it was from this commission
that the P75, 000.00 promotional fees were paid to the aforenamed individuals
leaving 50,000 as the profit. CIR argued that 75,000 is excessive as promotional fee
and should be disallowed.
CTA Held that the said amount had been legitimately paid by the Algue for actual services
rendered. The payment was in the form of promotional fees. These were collected by
the Payees for their work in the creation of the Vegetable Oil Investment Corporation
of the Philippines and its subsequent purchase of the properties of the Philippine
Sugar Estate Development Company.
The SG in behalf of the state argued that the burden is on the taxpayer to prove the
validity of the claimed deduction.
Issue W/N the CIR correctly disallowed the P75K deduction claimed by Algue as
legitimate business expenses in its income tax returns?
Ruling No. Under Tax code SEC. 30. Deductions from gross income.--In computing net
income there shall be allowed as deductions —
(a) Expenses:
(1) In general.--All the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business, including a reasonable allowance
for salaries or other compensation for personal services actually rendered;
In this case, The private respondent has proved that the payment of the fees was
necessary and reasonable in the light of the efforts exerted by the payees in inducing
investors and prominent businessmen to venture in an experimental enterprise and
involve themselves in a new business requiring millions of pesos. This was no mean
feat and should be, as it was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and operate
it. But even as we concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. If it is not, then the taxpayer has a right to
complain and the courts will then come to his succor. For all the awesome power of
the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has in this present case, that the law has not been observed.
G.R. No. L-28896 February 17, 1988
G.R. No. 198677 November 26, 2014
Petitioner COMMISSIONER OF INTERNAL REVENUE
Respondent BASF COATING + INKS PHILS., INC.,
Topic Limitation of tax
Doctrine Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government
itself
Facts BASF coating was a corporation with the principal business at Las Piñas City.
Subsequently, to Carmelray Industrial Park, Canlubang, Calamba, Laguna after the
corporation decided to dissolve its corporation by shortening its corporate term.
June 26, 2001-BASF submitted two (2) letters to the Bureau of Internal Revenue (BIR)
District Office in Alabang, Muntinlupa City. The first letter, dated April 26, 2001, was a
notice of respondent's dissolution. On the other hand, the second letter, dated June
22, 2001, was a manifestation indicating the submission of various documents
supporting respondent's dissolution, among which was BIR Form No. 1905, which
refers to an update of information contained in its tax registration.
Thereafter, in a Formal Assessment Notice (FA N) dated January 17, 2003, petitioner
assessed respondent the aggregate amount of ₱18,671,343.14 representing
deficiencies in various imposed taxes. The FAN was sent by registered mail on
January 24, 2003 to respondent's former address in Las Piñas City.
March 19, 2004-respondent filed a protest letter citing lack of due process and
prescription as grounds.
CTA February 17, 2010-the CTA Special First Division promulgated its Decision. The
aggregate amount of ₱18,671,343.14 for the taxable year 1999 are hereby
CANCELLED and SET ASIDE.
July 13, 2010-CTA dismissed the MR of CIR.
June 16, 2011-the CTA En Banc-dismissed the petition for review for lack of merit.
September 16, 2011-CTA en Banc dismissed the MR of CIR. Hence this appeal.
CIR appeal
In so far as BASF coating’s alleged deficiency taxes for the taxable year 1999 are
concerned, the running of the 3 year prescriptive period to assess, under Sections
203 and 222 of the National Internal Revenue Act of 1997 (Tax Reform Act of 1997)
was suspended when respondent failed to notify petitioner, in writing, of its change of
address, pursuant to the provisions of Section 223 of the same Act and Section 11 of
BIR Revenue Regulation No. 12-85.
Issue W/N CTA en Banc erred in upholding that the tax assessment by the CIR was
barred by prescription?
Ruling No. Section 203 of NIRA of 1997 provides that internal revenue taxes shall be
assessed within three (3) years after the last day prescribed by law for the filing of
the return, and no proceeding in court without assessment for the collection of such
taxes shall be begun after the expiration of such period.
It is true that, under Section 223 of the Tax Reform Act of 1997, the running of the
Statute of Limitations provided under the provisions of Sections 203 and 222 of the
same Act shall be suspended when the taxpayer cannot be located in the address
given by him in the return filed upon which a tax is being assessed or collected.
However, this Court agrees with both the CTA Special First Division and the CTA En
Banc in their ruling that the above mentioned provisions on the suspension of the
three-year period to assess apply only if the BIR Commissioner is not aware of the
whereabouts of the taxpayer.
In the present case, CIR, by all indications, is well aware that respondent had moved
to its new address in Calamba, Laguna, as shown by the documents which form part
of respondent's records with the BIR.
Hence, despite the absence of a formal written notice of respondent's change of
address, the fact remains that petitioner became aware of respondent's new address
as shown by documents replete in its records. As a consequence, the running of the
three-year period to assess respondent was not suspended and has already
prescribed.
2nd Issue W/N BASF coating right to due process was violated?
2nd Ruling Yes. No valid notice of assessment was sent to it. An invalid assessment bears no
valid fruit. Taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for government
itself. It is therefore necessary to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose of taxation, which is the
promotion of the common good, may be achieved.
It was held that the statute of limitations on the assessment and collection of taxes is
principally intended to afford protection to the taxpayer against unreasonable
investigations as the indefinite extension of the period for assessment deprives the
taxpayer of the assurance that he will no longer be subjected to further investigation
for taxes after the expiration of a reasonable period of time.
G.R. No. L-75697
Petitioner VALENTIN TIO
Respondent VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE
Topic
Facts PD 1987 was passed to imposed 30 percent tax and regulate the proliferation of
videograms such as video tapes and other variations.
Petitioner arguments
Petitioner argues that the imposition of tax is oppressive and harsh to the extent that
it restraint their trade.
Issue W/N the 30 percent imposed tax is oppressive and in restraint of trade?
Ruling No. the 30 % Tax imposed by PD 1987 an act creating videogram regulatory board, is
not only a revenue measure but also regulatory measure.
The levy of 30 percent is for public purpose. It was imposed primarily to answer the
need for regulating the video industry, particularly because of the rampant film
piracy, the flagrant violation of intellectual property rights.
G.R. No. L-7859 December 22, 1955
Petitioner WALTER LUTZ
Respondent J. ANTONIO ARANETA, as the Collector of Internal Revenue
s
Topic
Facts CA 576 provides for an increase of the existing tax on the manufacture of sugar.
SEC. 6. All collections made under this Act shall accrue to a special fund in the
Philippine Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,'
and shall be paid out only for any or all of the following purposes such as to put the
sugar industry in a position to maintain itself.
Lutz Argument
Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio
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, alleging that such tax
is unconstitutional and void, being levied for the aid and support of the sugar
industry exclusively.
Issue W/N the increase tax is void favoring one industry only?
Ruling No. Tax is an implement of police power. It is inherent in the power to tax that a
state be free to select the subjects of taxation, and it has been repeatedly held that
"inequalities which result from a singling out of one particular class for taxation, or
exemption infringe no constitutional limitation.
In this case, the funds raised under the Sugar Stabilization Act, should be exclusively
spent in aid of the sugar industry, since it is that very enterprise that is being
protected. Such law although favors one specific industry, is still valid since the
ultimate purpose of which is for the benefit of the public who relies on the production
of sugar as an essential necessity of the people. Therefore, the special fund
accumulated from such tax is used to regulate the viability of sugar industry in the
country.
G.R. No. L-31156 February 27, 1976
Petitioner PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC.,
Respondent MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL.,
Facts Municipality of Tanauan passed ordinance no. 23 and 27 pursuant to RA 2264
section 2 thereof.
O-23-Imposed 1/6 centavo for every bottle produce by the manufacturers
O-27-1 centavo for every gallon of volume capacity.
Ordinance no. 27 impliedly repealed ordinance no. 23 after it discovered that the
producer could increase the volume of the bottle but still pay the same tax.
Pepsi Cola argument
Argued that the said law is undue delegation of power and subsequent ordinance be
declared unconstitutional.
Issue W/N RA 2264 is unconstitutional?
Ruling No. The power of taxation is an essential and inherent attribute of sovereignty,
belonging as a matter of right to every independent government, without being
expressly conferred by the people. It is a power that is purely legislative and which
the central legislative body cannot delegate either to the executive or judicial
department of the government without infringing upon the theory of separation of
powers.
The exception, however, lies in the case of municipal corporations, to which, said
theory does not apply. Section 5, Article XI provides: "Each local government unit
shall have the power to create its sources of revenue and to levy taxes, subject to
such limitations as may be provided by law." Therefore, it cannot be said that Section
2 of Republic Act No. 2264 emanated from beyond the sphere of the legislative power
to enact and vest in local governments the power of local taxation.
G.R. No. L-59068 January 27, 1983
Petitioner JOSE MARI EULALIO C. LOZADA and ROMEO B. IGOT, petitioners,
Respondent COMMISSION ON ELECTIONS
Doctrine Taxpayer’s suit.
Requirements:
1. Personal and Substantial Interest- The taxpayer must show that they personally
suffer direct injury or will be burdened by the law or expenditure
2. Involvement of Public Funds- The case must involve the illegal or unconstitutional
use of public money or tax revenues.
3. Clear and Actual Case or Controversy- There must be a real legal issue at stake,
not just a hypothetical or political argument
XPN: The Doctrine of Transcendental Importance
Example: The Supreme Court allowed taxpayers to challenge the Disbursement
Acceleration Program (DAP) because it involved billions in public funds
Facts Petitioners in this case invoked the provision of 1973 constitution which provides that “In case a
vacancy arises in the Batasang Pambansa eighteen months or more before a regular election,
the Commission on Election shall call a special election to be held within sixty (60) days after the
vacancy occurs to elect the Member to serve the unexpired term.”
Petitioner Lozada claims that he is a taxpayer and a bonafide elector of Cebu City and a transient
voter of Quezon City, Metro Manila, who desires to run for the position in the Batasan Pambansa.
And compel the comelec to call for special election.
Defense of COMELEC
COMELEC, represented by counsel, opposes the petition alleging, substantially, that
petitioners lack standing to file the instant petition for they are not the proper parties
to institute the action;
Issue W/N Lozada can file this case under taxpayer’s suit?
Ruling No.As taxpayers, petitioners may not file the instant petition, for nowhere therein is it
alleged that tax money is being illegally spent. The act complained of is the inaction
of the COMELEC to call a special election, as is allegedly its ministerial duty under the
constitutional provision above cited, and therefore, involves no expenditure of public
funds. It is only when an act complained of, which may include a legislative
enactment or statute, involves the illegal expenditure of public money that the so-
called taxpayer suit may be allowed.
In this case, petition is one that entails expenditure of public funds which may be
illegal because it would be spent for a purpose that of calling a special election which,
as will be shown, has no authority either in the Constitution or a statute.
Issue W/N Lozada has personal interest on the inaction of COMELEC?
Ruling No. Lozada did not present direct or substantial interest.
To warrant the exercise of the courts power of judicial review it is important that the
person who files the same suffered or will suffer from the act complained of.
In this case, there is no injury suffered, because he is not a registered candidate.
G.R. No. 99886 March 31, 1993
Petitioner JOHN H. OSMEÑA
Respondent OSCAR ORBOS
Facts
Issue
Ruling
