1.
Ferrer vs Mayor Bautista
June 30, 2015
Facts:
Petitioner, a QC property owner, assails the constitutionality of two QC
ordinances - Socialized Housing Tax of Quezon City and garbage collection
fees.
SHT - shall accrue to General Fund under a special account to be established
for the purpose. (i.e. socialized housing programs & projects)
Garbage Collection Fees - dependent on the land or floor ares & whether the
payees is an occupant of a lot, condominium, social housing project or
apartment.
Issue: Can QC impose SHT & Garbage Collection Fees?
Ruling:
SHT - Yes, it is a tax within its power to impose. Cities are allowed to exercise
such other powers & discharge such other functions & responsibilities as are
necessary, appropriate, or incidental to efficient & effective provision of the
basic service & facilities. However, this tax is not a pure exercise of taxing
power or merely to raise revenue; it is levied with regulatory purpose. The levy
is primarily in the exercise of the police power for the general welfare of the
entire city. It is greatly imbued with public interest.
Garbage Collection Fees - INVALID. Although it does not violate the rule on
double taxation, it nonetheless violates the rule on equality. Since the fee is
charge fixed for the regulation of an activity, it is not a tax. Hence, not being a.
Tax, the contention that it violates the rule on double taxation must fail.
2. Diaz vs Sec. of Finance
July 19, 2011
Facts:
Petitioners assail the validity of the imposition of VAT on the collections of
tollway operators.
Issue: WON the imposition of VAT on tollway operations not administratively
feasible and hence invalid.
Administrative Feasibility
Although the petitioners assert that the substantiation requirements for
claiming input VAT may the VAT on tollway operations impractical & incapable
of implementation, thus, not administratively feasible, it is not necessarily
invalid unless some aspect of it is shown to violate any law or the Constitution.
Even though it administrative feasibility is one of the canons of the sound tax
system, the non-observance of such, however, will not render a tax imposition
invalid “except to the extent that specific constitutional or statutory limitations
are impaired.
Distinction between the direct tax & indirect tax
In indirect taxation, a distinction is made between the liability for the tax &
burden of the tax: The seller who is liable for the VAT may shift the amount of
VAT it paid on goods, properties, or services to the buyer. In such case, what is
transferred is not the seller’s liability but merely the burden of the VAT.
3. Manila Memorial Park & La Funeraria Paz-Sucat vs Sec. of DSWD & Sec. of
Finance
December 3, 2013
Facts:
R.A. 9257 was issued, amending R.A. 7432, which provides that the 20% senior
citizen may be claimed as a tax deduction.
Petitioners challenge its constitutionality & pray that the tax credit treatment of
the 20% discount be reinstated. They posit that the resolution of this case lies
in the determination whether the legally mandated 20% SC discount is an
exercise of police power or eminent domain. If it is PP, no just compensation
warranted. But if it’s ED, the tax deduction scheme is unconstitutional because
it is not a peso for peso reimbursement of the 20% discount given to SC. Thus,
it constitutes as taking of private property without payment of just
compensation.
Issue: Is the tax deduction scheme an exercise of Police Power or Eminent
Domain?
Ruling:
POLICE POWER. The 20% discount given to SC is a valid exercise of Police Power.
The discount is intended to improve the welfare of the SC who, at their age, are
less likely to be gainfully employed, more prone to illnesses and other
disabilities, & thus, in need of subsidy in purchase of basic commodities. The
discount is a regulation affecting the establishments’ ability to price their
products & services relative to SC for which the Constitution affords preferential
concern.
Thus, even if the current law, through its tax deduction scheme (which
abandoned the tax credit scheme under the previous law), does not provide
peso for peso reimbursement of the 20% discount given by private
establishments, no constitutional infirmity obtains, because being a valid
exercise of police power, payment of just compensation is not warranted.
4. Southern Luzon Drug vs DSWD
April 25, 2017
Facts:
The petitioner assails the implementation of Sec 4(a) of RA 9257 (Expanded
Senior Citizens Act of 2003) & Sec 32 of RA 9442 which amends the Magna
Carta for Disabled Persons particularly the granting of 20% discount on the
purchase of medicines by SC & PWD and treating them as tax deduction.
Issues: WON Sec 4(a) of RA 9257 & Sec 32 of RA 9442 are constitutional &
valid exercise of eminent domain.
Ruling:
Constitutional. There is no question that the grant of mandatory discount is
germane to the purpose of R.A. Nos. 9257 and 9442, that is, to adopt an
integrated and comprehensive approach to health development and make
essential goods and other social services available to all the people at
affordable cost, with special priority given to the elderlies and the disabled,
among others. The privileges granted by the laws ease their concerns and allow
them to live more comfortably.
The subject laws also address a continuing concern of the government for the
welfare of the senior citizens and PWDs. It is not some random predicament but
an actual, continuing and pressing concern that requires preferential attention.
Also, the laws apply to all senior citizens and PWDs, respectively, without
further distinction or reservation. Without a doubt, all the elements for a valid
classification were met.
Equal protection clause is not infringed by legislation which applies only to
those falling within specified class. If the groupings are characterized by
substantial distinctions that make real differences, one class may be treated
and regulated differently from another.
Nursery Care vs Acevedo
July 30, 2014
Facts:
The City of Manila assessed and collected taxes from the individual petitioners
pursuant to Section 15 (Tax on Wholesalers, Distributors, or Dealers) and
Section 17 (Tax on Retailers) of the Revenue Code of Manila. At the same time,
the it imposed additional taxes upon the petitioners pursuant to Section 21 of
the Revenue Code of Manila, as amended, which imposes tax on a person who
sold goods & services in the course of trade & business based on a certain
percentage of his gross sales or receipts in the preceding calendar year, as a
condition for the renewal of their respective business licenses for the year
1999.
Issue: Is there a double taxation?
Ruling:
Yes. All the elements of double taxation concurred upon the City of Manila’s
assessment on and collection from the petitioners of taxes for the first quarter
of 1999 pursuant to Sec. 21 of the Revenue Code of Manila. Firstly, because
Sec. 21 of the Revenue Code of Manila imposed the tax on a person who sold
goods and services in the course of trade or business based on a certain
percentage of his gross sales or receipts in the preceding calendar year, while
Sec. 15 and Sec. 17 likewise imposed the tax on a person who sold goods and
services in the course of trade or business but only identified such person with
particularity, namely, the wholesaler, distributor or dealer (Sec. 15), and the
retailer (Sec. 17), all the taxes — being imposed on the privilege of doing
business in the City of Manila in order to make the taxpayers contribute to the
city’s revenues — were imposed on the same subject matter and for the same
purpose. Secondly, the taxes were imposed by the same taxing authority (the
City of Manila) and within the same jurisdiction in the same taxing period (i.e.,
per calendar year). Thirdly, the taxes were all in the nature of local business
taxes (Nursery Care Corporation v. Acevedo, 731 SCRA 280, G.R. No. 180651,
July 30, 2014, penned by Justice Bersamin).
6. Republic of the Philippines, represented by the Philippine Reclamation
Authority vs City of Parañaque
July 18, 2012
Facts:
President GMA issued E.O. No. 380 transforming Public Estates Authority (PEA)
to Philippine Reclamation Authority (PRA), which is primarily responsible for
integrating and directing all reclamation projects for the national government.
By virtue of its mandate, PRA reclaimed several portions of the foreshore and
offshore of Manila Bay, including those located in Parañaque City. Certificates of
title to reclaimed properties were issued in the name of of PRA. The City
Treasurer issued Warrants of Levy based on the assessment for delinquent RPT.
The City claims that PRA is a GOCC and hence subject to tax. However, PRA
claims that it is government instrumentality.
Issue: WON PRA is a government instrumentality and hence exempt from RPT.
Ruling:
Yes, it is a government instrumentality. It is not a GOCC because it is neither a
stock nor a non-stock corporation. It cannot be considered as a stock
corporation because although it has a capital stock divided into no par value
shares as provided in Section 74 of P.D. No. 1084, it is not authorized to
distribute dividends, surplus allotments or profits to stockholders. PRA is a
government instrumentality vested with corporate powers and performing an
essential public service pursuant to Section 2(10) of the Introductory Provisions
of the Administrative Code. Being an incorporated government instrumentality,
it is exempt from payment of real property tax.
Many government instrumentalities are vested with corporate powers but they
do not become stock or non-stock corporations, which is a necessary condition
before an agency or instrumentality is deemed a GOCC. The fundamental
provision above authorizes Congress to create GOCCs through special charters
on two conditions: 1) the GOCC must be established for the common good; and
2) the GOCC must meet the test of economic viability. In this case, PRA may
have passed the first condition of common good but failed the second one -
economic viability. Undoubtedly, the purpose behind the creation of PRA was
not for economic or commercial activities.
Clearly, respondent has no valid or legal basis in taxing the subject reclaimed
lands managed by PRA.
On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o),
exempts PRA from paying realty taxes and protects it from the taxing powers of
local government units.
Section 234(a) of the Local Government Code states that real property owned by
the Republic of the Philippines (the Republic) is exempt from real property tax
unless the beneficial use thereof has been granted to a taxable person.
Section 133 of the Local Government Code states that "unless otherwise
provided" in the Code, local governments cannot tax national government
instrumentalities.
7. La Suerte Cigar vs Court of Appeals
November 11, 2014
Facts:
These cases involve the taxability of stemmed leaf tobacco imported and locally
purchased by cigarette manufacturers for use as raw material in the
manufacture of their cigarettes. Under the Tax Code, if it is to be exported or to
be used in the manufacture of cigars, cigarettes, or other tobacco products on
which the excise tax will eventually be paid on the finished product.
La Suerte was assessed by the BIR for excise tax deficiency amounting to more
than 34 million pesos. La Suerte protested invoking the Tax Code which allows
the sale of stemmed leaf tobacco as raw material by one manufacturer directly
to another without payment of the excise tax. However, the CIR insisted that
stemmed leaf tobacco is subject to excise tax "unless there is an express grant
of exemption from [the] payment of tax.”
La Suerte petitioned for review before the CTA which cancelled the assessment.
The CIR appealed to the CA which reversed the CTA. The CIR invoked a revenue
regulation (RR) which limits the exemption from payment of specific tax on
stemmed leaf tobacco to sales transactions between manufacturers classified as
L-7 permittees.
Issue: Is there double taxation?
Ruling:
In this case, there is no double taxation in the prohibited sense because the
specific tax is imposed by explicit provisions of the Tax Code on two different
articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or
cigarette.
8. CIR vs St. Luke’s Medical Center
September 26, 2012
Facts:
St. Luke’s is a hospital organized as non-stock & non-corporation. Sometime in
2002, BIR assessed St. Luke’s deficiency tax. St. Luke’s protested and led an
administrative protest with BIR but was not acted by the latter within the 180
period thus reaching to the CTA.
BIR’s contention: Section 27B of the NIRC imposing a 10% preferential tax rate
applies to St. Luke’s. Its reason is that it amends the exemption on non-profit
hospitals and which prevails over the exemption on income tax granted under
Section 30 (E and G) for non-stock, nonprofit charitable institution and civic
organizations promoting social welfare. It further claimed that St. Luke’s was
actually operating for profit because only 13% came from charitable purposes
and that it had a total revenue of P1.73B from patient services in 1998.
ST. LUKE’S Contention: Its operating income only totaled P334 M (less the
operating expenses) and out of that P218M (65%) made up its free services and
further claimed that its income does not inure to the benefit of anyone.
Furthermore, it argued that it falls under the exception provided under Sec. 30
(E) and (G) of NIRC and making of profit per se does not destroy its tax
exemption.
CTA en banc’s Decision: Ruled in favor of St. Luke’s exemption under Sec. 30
and reiterated its earlier ding in another case identifying St. Luke’s as a
charitable institution. CTA adopted the test in Hospital de San Juan de Dios, Inc.
v. Pasay City, which states that "a charitable institution does not lose its
charitable character and its consequent exemption from taxation merely
because recipients of its benefits who are able to pay are required to do so,
where funds derived in this manner are devoted to the charitable purposes of
the institution . . . ." (The generation of income from paying patients does not
per se destroy the charitable nature of St. Luke’s.)
Issue: WON St. Luke’s liable for deficiency income tax under Sec 27 (b) of the
NIRC which imposes a 10% preferential rate on the income of proprietary non-
profit hospitals.
Ruling:
Petition partially granted. St. Luk’es is liable under Sec 27 (b) of the NIRC. Under
Sec. 30 (E) of the NIRC provides that a charitable institution must be: (1) non-
stock corporation or association; (2)ORGANIZED EXCLUSIVELY for charitable
purposes; (3) OPERATED EXCLUSIVELY for charitable purposes; (4) No part of
its net income or asset shall inure to the benefit of any member , officer or any
person. Under the last paragraph of Sec. 30 of the NIRC if a tax exempt
charitable institution conducts "any" activity for profit, such activity is NOT TAX
EXEMPT even as its not-for-profit activities remain tax exempt. It simply
means that even if a charitable institution organized and operated exclusively
for charitable purposes is nevertheless allowed to engage in “activities
conducted for profit” without losing its tax exempt status for its no-for-pro t
activities. However, as a consequence "income of whatever kind and
character" of a charitable institution "from any of its activities conducted
for profit, regardless of the disposition made of such income, shall be
subject to tax." (Sec. 30, last par.). Therefore, services rendered to paying
patients are activities conducted for profit and thus taxable under Sec. 27 (B) of
the NIRC.
St. Luke's fails to meet the requirements under Section 30 (E) and (G) of the
NIRC to be completely tax exempt from all its income. However, it remains a
proprietary non-profit hospital under Section 27 (B) of the NIRC as long as it
does not distribute any of its profits to its members and such profits are
reinvested pursuant to its corporate purposes. St. Luke's, as a proprietary non-
profit hospital, is entitled to the preferential tax rate of 10% on its net
income from its for-profit activities.
9. CIR vs De la Salle University
November 9, 2016
Facts:
DLSU leases out a portion of its property to private concessionaires, i.e.,
commercial canteens & bookstores. The lease payments were used for
educational purposes.
CIR claims that DLSU’s rental income is taxable regardless of how such income
is derived, used or disposed of. DLSU’s operations of canteens & bookstores
with its campus even though exclusively serving the university community do
not negate income tax liability.
Issues & Rulings:
1. Is the land owned by DLSU subject to RPT?
Yes but only to the portion used for commercial purposes. There is no
exemption because the asset is not used actually, directly, & exclusively
for educational purposes.
2. Are the lease payments received by DLSU subject to income tax & VAT?
No. The requisites for availing the tax exemption (revenue & assets)
under Article XIV, Section 4 (3), namely: (1) the taxpayer falls under the
classification non-stock, non-profit educational institution; and (2) the
income it seeks to be exempted from taxation is used actually, directly
and exclusively for educational purposes. It does not require that the
revenues and income must have also been sourced from educational
activities or activities related to the purposes of an educational
institution. Thus, when a non-stock, non-profit educational institution
proves that it uses its revenues actually, directly, and exclusively for
educational purposes, it shall be exempted from taxes & duties such as
income taxes & VAT.
10. LG Electronics vs CIR
December 3, 2014
Facts:
On March 21, 1998, LG received a formal assessment notice and demand letter
from the Bureau of Internal Revenue. On April 17, 1998 an administrative
protest with the Bureau of Internal Revenue against the tax assessment.
Without waiting for the Commissioner of Internal Revenue’s resolution of the
protest, LG filed a Petition for Review before the Court of Tax Appeals on
January 11, 1999. In its Decision dated May 11, 2004, the Court of Tax Appeals
ruled that LG was liable for the payment, representing deficiency income tax
for taxable year 1994, including 20% delinquency interest computed from
March 18, 1998.
LG filed a Motion for Partial Reconsideration on June 4, 2004. On September 22,
2004, the Court of Tax Appeals partially granted the Motion. It reduced LG’s
liability.
On November 18, 2004, LG filed the present Petition for Review on Certiorari.
On January 19, 2005, the Commissioner of Internal Revenue was required to file
its Comment Petitioner manifested that it availed itself of the tax amnesty
provided under Republic Act No. 9480. According to the BIR, petitioner cannot
claim the tax amnesty provided under Republic Act No. 9480 for the following
reasons: (1) accounts receivable by the Bureau of Internal Revenue as of the
date of amnesty are not covered since these constitute government property;
(2) cases that have already been favorably ruled upon by the trial court or
appellate courts prior to the availment of tax amnesty are not covered; and (3)
petitioner’s case involves withholding taxes that are not covered by the Tax
Amnesty Act.
Issue: whether or not the petitioner is entitled for the tax amnesty?
Ruling:
Taxpayers who availed themselves of the tax amnesty program are entitled to
the immunities and privileges under Section 6 of NIRC. In several cases, this
court explained the nature of a tax amnesty. A tax amnesty is a general pardon
or the intentional overlooking by the State of its authority to impose penalties
on persons otherwise guilty of violation of a tax law. It partakes of an absolute
waiver by the government of its right to collect what is due it and to give tax
evaders who wish to relent a chance to start with a clean slate. A tax amnesty,
much like a tax exemption, is never favored or presumed in law. The grant
of a tax amnesty, similar to a tax exemption, must be construed strictly against
the taxpayer and liberally in favor of the taxing authority. Under Republic Act
No. 9480 and BIR Revenue Memorandum Circular No. 55-2007, the qualified
taxpayer may immediately avail of the immunities and privileges upon
submission of the required documents.
WHEREFORE, in view of petitioner LG Electronics Philippines, Inc.’s availment of
the tax amnesty program under Republic Act No. 9480, the petition is DENIED
for being MOOT and ACADEMIC. Petitioner’s deficiency taxes for taxable year
2005 and prior years are deemed fully settled.
11. China Banking vs. CIR
February 4, 2015
12. Air Canada vs CIR
January 11, 2016
Facts:
Air Canada is a "foreign corporation organized and existing under the laws of
Canada. On April24, 2000, it was granted an authority to operate as an offline
carrier by the Civil Aeronautics Board, subject to certain conditions, which
authority would expire on April 24, 2005. As an off-line carrier, Air Canada
does not have flights originating from or coming to the Philippines and does
not operate any airplane in the Philippines.
Air Canada engaged the services of Aerotel Ltd., Corp. (Aerotel) as its general
sales agent in the Philippines. Aerotel "sells Air Canada's passage documents in
the Philippines.
Air Canada filed a written claim for refund of alleged erroneously paid income
taxes amounting toP5,185,676.77 before theBureau of Internal Revenue,
Revenue District OfficeNo.47-EastMakati.It found basis from the revised
definition of Gross Philippine Billings under Section 28(A) (3)(a) of the 1997
National Internal Revenue Code.
Issue: WON the Republic of the Philippines-Canada Tax Treaty applies.
Ruling:
Yes. The tax treaty must be taken into consideration to determine the proper
tax rate. Observance of any treaty obligation binding upon the government of
the Philippines is anchored on the constitutional provision that the Philippines
"adopts the generally accepted principles of international law as part of the law
of the land[.]” Pacta sunt servanda is a fundamental international law principle
that requires agreeing parties to comply with their treaty obligations in good
faith. Hence, the application of the provisions of the National Internal Revenue
Code must be subject to the provisions of tax treaties entered into by the
Philippines with foreign countries. Through the appointment of Aerotel as its
local sales agent, petitioner is deemed to have created a
"permanent"establishment" in the Philippines as defined under the Republic of
the Philippines-Canada Tax Treaty.
While petitioner is taxable as a resident foreign corporation under Section 28(A)
(1) of the 1997 National Internal Revenue Code on its taxable income116 from
sale of airline tickets in the Philippines, it could only be taxed at a maximum of
1 1/2% of gross revenues, pursuant to Article VIII of the Republic of the
Philippines-Canada Tax Treaty that applies to petitioner as a "foreign
corporation organized and existing under the laws of Canada.
13. CIR vs Toledo Power Company
December 2, 2015
Facts:
TPC filed with BIR RDO a claim for refund/credit of its unutilized input VAT for
taxable year 2002 under RA 9136 or the Electric Power Industry Reform Act of
2001 (EPIRA) & the NIRC.
CTA Decision:
Allowed claim for refund of its unutilized input VAT attributable to its zero-
related sales of electricity to NAPOCOR of 2002 since the latter is exempt from
the payment of all taxes, including VAT.
Denied the claim attributable to TPC’s sale of electricity to CEBECO, ACMDC, &
AFDC due to failure of TPC to prove that it is a generation company under the
EPIRA. It did not consider the said sales as valid zero-rated sales because TPC
did not submit a Certificate of Compliance (COC) from the Energy Regulatory
Commission (ERC). Although TPC filed an application for a COC on June 20,
2002 with the ERC, the CTA-Division found this insufficient to prove that TPC is
a generation company under the EPIRA.
CTA En Banc Decision:
Affirmed the CTA -Division’s ruling. It sustained that findings of the CTA-
Division that both the administrative and judicial claims were timely filed and
that TPC’s non-compliance with the RMO No. 53-98 was not fatal to its claim.
Issues: Whether or not the administrative and judicial claims for tax refund/
credit were timely and validly filed; and effectively entitles TPC to the full
amount of its claim for tax refund/credit.
Ruling:
As to amount, TPC is not entitled to the whole amount. TPC is not entitled to a
refund/credit of unutilized input VAT attributable to its sales of electricity to
CEBECO, ACMDC, and AFC.
To be entitled to a refund/credit of unutilized input VAT attributable to the sale
of electricity under the EPIRA, a taxpayer must establish: (1) that it is a
generation company, and (2) that it derived.
In the present case, TPC failed to present a COC from the ERC during the trial .
On partial reconsideration, TPC argued that there was no need to present a COC
because the parties already stipulated in the Joint Stipulation of Facts & Issues
that TPC is a generation company and that it became entitled to the rights
under the EPIRA when it filed its application with the ERC on June 20, 2002.
But the Court ruled that there’s nothing in the JSFI that would show that the
parties agreed that TPC is a generation company under the EPIRA. They only
stipulated that TPC is engaged in the business power generation and that it
filed an application with the ERC on June 20, 2002. Being engaged in the
business of power generation does not make TPC a generation company under
the EPIRA. Neither did TPC's filing of an application for Certificate of
Compliance with the Energy Regulatory Commission automatically entitle TPC
to the rights of a generation company under the EPIRA.
Although it filed an application for a COC on June 20, 2002, it did not
automatically become a generation company. It was only on June 23, 2005,
when the ERC issued a COC in favor of TPC, that it became a generation
company under EPIRA.
Consequently, TPC's sales of electricity to CEBECO, ACMDC, and AFC cannot
qualify for VAT zero-rating under the EPIRA. Hence, the CTA En Banc’s ruling is
affirmed. Only entitled to P7,598,279.29, representing unutilized input taxes
attributable to zero-rated sales for 2002.
