CIR vs. Algue
Facts: Algue, engaged in an engineering corporation, claims tax deductions in the amount of P75,000.00 alleging that such amount are promotional fees, thus, in accord with the provisions of the Tax Code as being ordinary and necessary expenses. The CIR disallowed the deductions.
Issue: WON the CIR was correct in disallowing the tax deductions.
The claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the CIR.
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. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
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 here, that the law has not been observed.
CIR vs. Tokyo Shipping Co., Ltd.
Facts: Tokyo shipping is a foreign corporation which owns and operates a vessel. The vessel was chartered by a certain Nasutra to load raw sugar in the Phil thru its representative. Thus, Tokyo Shipping’s representative made a pre-payment of the required income and common carrier’s taxes. Upon arrival at the port, the vessel found no sugar for loading, thus, claimed for a tax refund. The CIR failed to act promptly, thus, respondent went to CTA which decided in their favor. The CIR claims otherwise.
Issue: WON Tokyo Shipping is entitled to a tax refund.
Pursuant to section 24 (b) (2) of the National Internal Revenue Code, a resident foreign corporation engaged in the transport of cargo is liable for taxes depending on the amount of income it derives from sources within the Philippines. Thus, before such a tax liability can be enforced the taxpayer must be shown to have earned income sourced from the Philippines. The respondent court held that sufficient evidence has been adduced by the private respondent proving that it derived no receipt from its charter agreement with NASUTRA.
Fair deal is expected by our taxpayers from the BIR and the duty demands that BIR should refund without any unreasonable delay what it has erroneously collected.
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.
BPI-Family Savings Bank vs. CA
Facts: BPI claims for a tax refund of P112,491. As appearing in its 1989 ITR, BPI has a total of P297,492 refundable taxes. BPI declared in its 1989 ITR that it would apply the excess withholding tax as a tax credit for the year 1990. Subsequently, however, BPI claimed for a tax refund since in the year 1990 it suffered losses, thus, could not have applied said amount as tax credit. The CIR and CTA denied this on the ground that BPI failed to show its 1990 ITR which would show that the amount claimed was not applied as a tax credit.
Issue: WON BPI is entitled to a tax refund.
Evidence shows that petitioner suffered a net loss in 1990, thus, it could not have applied the amount claimed as tax credits.
Substantial justice, equity and fair play are on the side of petitioner. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.
PBCom vs. CA
Facts: PBCom in 1985 were issued tax debits in the total amount of P5,016,954. In 1986 it reported a net loss of P14,129,602, thus, declared no tax for that year. During these two years, however, PBCOm withheld and remitted to the BIR withholding creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On 1987, PBCom requested CIR to grant them a tax credit in the amount of P5,016,954 representing the overpayment in 1986. On 1988, it filed a claim for refund for property rentals (P282,795.50 in 1985 and P234,077.69). The CIR, affiermed by the CA, denied the claim for refund of P5,016,954 on the ground that it was filed beyond the reglementary period and also the claim for P234,077.69 on the ground that PBCom has opted and in all likelihood automatically credited the same to the succeeding year.
Issue: WON PBCom is entitled to tax refund.
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. Due process of law under the Constitution does not require judicial proceedings in tax cases. This must necessarily be so because it is upon taxation that the government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to enforce the collection of taxes levied should be summary and interfered with as little as possible.
From the same perspective, 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.
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.
Chavez vs. Ongpin
Facts: Chavez, owner of some number of parcels of land challenges the constitutionality of EO 73, which increased the assessment for real property taxes. Intervenor Realty Owners Association of the Phil (ROAP) also challenged the constitutionality of EO 73 and EO 464, the latter order having been the basis for the enactment of EO 73.
Issue: Whether EO 73 imposes unreasonable increase in real property taxes, thus, should be declared unconstitutional.
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. If at all, it is Presidential Decree No. 464 which should be challenged as constitutionally infirm. However, Chavez failed to raise any objection against said decree. It was ROAP, the intervenor, which questioned the constitutionality thereof.
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.
Philex Mining Corp vs. CIR
Facts: The BIR sent a letter to Philex asking the latter to settle its tax liabilities. Philex protested the demand contending that it has pending claims for VAT input credit/refund for taxes it paid for the previous years. Thus, Philex wants to set-off or apply the concept of compensation in its favor. The BIR refused. The CTA, affirmed by CA, ruled against Philex stating that “taxes cannot be subject to set-off on compensation since claim for taxes is not a debt or contract.”
Issue: WON the pending claim for refund of Philex may be applied against an existing tax liability; or, WON Philex may set-off its tax liability against its pending claims for refund.
1. Taxes cannot be subject to compensation for the simple reason that the government and the taxpayer are not creditors and debtors of each other. 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;
2. Philex’s reliance on our holding in Commissioner of Internal Revenue v. Itogon-Suyoc Mines Inc., wherein the SC ruled that a pending refund may be set off against an existing tax liability even though the refund has not yet been approved by the Commissioner, is no longer without any support in statutory law.
It is important to note, that the premise of our ruling in the aforementioned case was anchored on Section 51 (d) of the National Revenue Code of 1939. However, when the National Internal Revenue Code of 1977 was enacted, the same provision upon which the Itogon-Suyoc pronouncement was based was omitted. Accordingly, the doctrine enunciated in Itogon-Suyoc cannot be invoked by Philex.
Gerochi, et al vs. Dept of Energy
Facts: Gerochi et al seeks the declaration of Sec. 34 of RA 9136 (Electric Power Industry Refor Act of 1991-EPIRA) which imposes a Universal Charge against all electric end-users on a monthly basis, as unconstitutional on the ground of: such universal charge is a tax, which power to impose is a strictly legislative function, thus, constitutes an undue delegation of legislative power on the part of the Energy Regulatory Commission (ERC).
Issue: Whether the universal charge is a tax; and, whether there is an undue delegation of legislative taxing power to ERC.
Held: Both negative.
1. The conservative and pivotal distinction between power to tax and police power rests in the purpose for which the charge is made. If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax.
It can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the exercise of the State’s police power. Public welfare is surely promoted.
Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police power.
The Special Trust Fund reasonably serves and assures the attainment and perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure the viability of the country’s electric power industry.
2. A logical corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in the Latin maxim potestas delegata non delegari potest (what has been delegated cannot be delegated).
All that is required for the valid exercise of this power of subordinate legislation is that the regulation be germane to the objects and purposes of the law and that the regulation be not in contradiction to, but in conformity with, the standards prescribed by the law. These requirements are denominated as the completeness test and the sufficient standard test.
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is complete in all its essential terms and conditions, and that it contains sufficient standards.
Roxas et al vs CTA
Facts: Roxas Y Cia is a partnership managing agricultural lands with a total land area of 19,000 ha (Known as the Nasugbu farmlands). The tenants therein wanted to acquire the land they till, thus the government persuaded Roxas Y Cia to sell to it some of its lands. Roxas Y Cia agreed but it turned out that the govt does not have sufficient funds to pay for such lands, hence, Roxas Y Cia took the burden of selling the lands directly to the tenants on installment basis. Because of Roxas Y Cia’s act of making profits from the purchase and sale of securities, the Commissioner of Internal Revenue demanded from it fixed tax of dealer’s securities, hence, 100% of the profits made therefrom was taxed.
Issue: WON the assessment made by the CIR is correct (of taxing 100% of the profits made from the sale of the lands to the tenants made by Roxas).
It should be borne in mind that the sale of the Nasugbu farm lands to the very farmers who tilled them for generations was not only in consonance with, but more in obedience to the request and pursuant to the policy of our Government to allocate lands to the landless.
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 does not conform with Our sense of justice in the instant case for the Government to persuade the taxpayer to lend it a helping hand and later on to penalize him for duly answering the urgent call.
In fine, 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%.
Phil Health Care Providers Inc vs CIR
Facts: Phil Health Care Providers is a corporationengaged in providing medical/health care programs to its members who pay annual membership fees. The CIR demanded from the corporation deficiency taxes, constituting Documentary Stamp Tax (DST) imposed upon on its health care agreements. The corporation sought the cancellation of the DST assessments, among others, contending that it is a Health Maintenance Org (HMO) and not an insurance company, thus, not liable for DST on its health care agreements. It also asserts that the assessed DST which amounts to
P376 million is way beyond its net worth of P259 million.
Issue: WON the corporation is liable for the payment of DST on its health care agreements.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who is to pay it.So potent indeed is the power that it was once opined that “the power to tax involves the power to destroy.”
Given the realities on the ground, imposing the DST on petitioner would be highly oppressive. It is not the purpose of the government to throttle private business. On the contrary, the government ought to encourage private enterprise. The corporation, just like any concern organized for a lawful economic activity, has a right to maintain a legitimate business. As aptly held in Roxas, et al. v. CTA, et al.:
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.”
Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring losses because of a tax imposition may be an acceptable consequence but killing the business of an entity is another matter and should not be allowed. It is counter-productive and ultimately subversive of the nation’s thrust towards a better economy which will ultimately benefit the majority of our people.
CIR vs. Lingayen Gulf Electric Power Co & CTA
Facts: Lingayen operates an electric power plant, in which its municipal franchise imposes upon it the payment of not more than 2% franchise tax. Subsequently its franchise was approved by the Pres of the Phil. As such, the BIR demanded from it the payment of deficiency taxes applying franchise tax rates of 5% on gross receipts. Lingayen refused, as according to it, it made overpayment. Pending the cases, RA 3843 was approved which granted Lingayen legislative franchises for the operation of the electric light, etc., which imposed upon it the payment of only 2% franchise tax, effective from the date the original municipal franchise was granted. Thus, the CTA absolved Lingayen from all its liabilities. The CIR submits that RA 3843 in so far as it grants Lingayen the payment of only 2% Franchise tax is discriminatory and hence, violative of the rule on equality and uniformity of taxation as others are subject to 5% franchise tax.
Issue: WON the SC may determine the validity of RA 3843 as to its imposition of a 2% franchise tax in favor of Lingayen.
The SC has no authority to inquire into the wisdom of such act. R.A. No. 3843 did not only fix and specify a franchise tax of 2% on its gross receipts, but made it “in lieu of any and all taxes, all laws to the contrary notwithstanding,” thus, leaving no room for doubt regarding the legislative intent. “Charters or special laws granted and enacted by the Legislature are in the nature of private contracts. They do not constitute a part of the machinery of the general government. They are usually adopted after careful consideration of the private rights in relation with resultant benefits to the State … in passing a special charter the attention of the Legislature is directed to the facts and circumstances which the act or charter is intended to meet. The Legislature consider (sic) and make (sic) provision for all the circumstances of a particular case.”
CIR vs. Judge Santos
Facts: The BIR examined the books and accounting records of Jewelry by Marco & Co. for excise tax purposes. Alleging that the provisions of the Tariff and Customs Code are oppressive and confiscatory, presenting on its behalf data on the differences of tax rates in Asia, sought said Code to declare unconstitutional. Judge Santos, an RTC judge, ruled in favor of Jewelry by Marco & Co, and declared that said law is inoperative and without force and effect as far as Jewelry by Marco & Co is concerned, or unconstitutional.
Issue: WON the RTC judge correctly declared some provisions of the Tariff and Customs Code as unconstitutional.
The trial court is not the proper forum for the ventilation of the issues raised by the private respondents. The arguments they presented focus on the wisdom of the provisions of law which they seek to nullify. Regional Trial Courts can only look into the validity of a provision, that is, whether or not it has been passed according to the procedures laid down by law, and thus cannot inquire as to the reasons for its existence. Granting arguendo that the private respondents may have provided convincing arguments why the jewelry industry in the Philippines should not be taxed as it is, it is to the legislature that they must resort to for relief, since with the legislature primarily lies the discretion to determine the nature (kind), object (purpose), extent (rate), coverage (subjects) andsitus (place) of taxation. This Court cannot freely delve into those matters which, by constitutional fiat, rightly rest on legislative judgment.
“The judiciary does not pass upon questions of wisdom, justice or expediency of legislation.” And fittingly so, for in the exercise of judicial power, we are allowed only “to settle actual controversies involving rights which are legally demandable and enforceable”, and may not annul an act of the political departments simply because we feel it is unwise or impractical. This is not to say that Regional Trial Courts have no power whatsoever to declare a law unconstitutional. In J.M. Tuason and Co. v. Court of Appeals, we said that “[p]lainly the Constitution contemplates that the inferior courts should have jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of appellate review offinal judgments of inferior courts in cases where such constitutionality happens to be in issue.” This authority of lower courts to decide questions of constitutionality in the first instance reaffirmed in Ynos v. Intermediate Court of Appeals. But this authority does not extend to deciding questions which pertain to legislative policy.
Mactan Cebu Int’l Airport (MCIAA) vs Judge Marcos
Facts: MCIAA, since the time of its creation, enjoyed the privilege of exemption from payment of realty taxes in accordance with its charter. The Office of the Treasurer of the City of Cebu, however, demanded from it the payment of realty taxes over several parcels of land belonging to it. Mciaa was compelled to pay under protest, thus, it filed a petition for declaratory relief with the RTC. The latter dismissed the petition on the ground that under Sections 193 and 234 of the Local Gov’t Code of 1991 (LGC), such exemption from taxes in favor of GOCCs had been expressly cancelled/withdrawn.
MCIAA: Invokes Section 133 of the LGC which puts limitations on the taxing powers of LGUs on an instrumentality of the gov’t performing governmental functions (i.e. carrying out government policies of promoting and developing the Central Visayas and Mindanao regions as centers of int’l trade & tourism x x x)
Respondents: MCIAA is a GOCC whos tax exemption privilege had been withdrawn by virtue of Sections 193 & 234 of the LGC.
Issue: WON MCIAA< a GOCC, is exempted from the payment of realty taxes pursuant to Section 133 of the LGCC>
Held: Negative. The last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if MCIAA can show that the parcels of land in question, which are real property, are any one of those enumerated in Section 234, either by virtue of ownership, character, or use of the property.
As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations thereon may be imposed by the people through their Constitutions. Our Constitution, for instance, provides that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of taxation. So potent indeed is the power that it was once opined that “the power to tax involves the power to destroy.” Verily, taxation is a destructive power which interferes with the personal and property for the support of the government. Accordingly, tax statutes must be construed strictly against the government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority. A claim of exemption from tax payment must be clearly shown and based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations.
Tan Tiong Bio, et al vs CIR; GR L-15778
Facts: A corporation Central Syndicate, allegedly purchased from Dee Hong Lue stock of surplus properties from the Foreign Liquidation Commission. Thus, it remitted the amount of P43,750 as deposit for the sales tax. Later on, it claimed refund for the excess in the payment of the sales tax due to the adjustment and reduction of the purchase price. However, an agent of the CIR reported that it was the syndicate who was the actual importer and original seller of the surplus goods. Thus, the syndicate is liable to pay the whole amount of the sales tax. The CTA rendered a decision holding the incorporators of the syndicate to be severally liable, the syndicate’s personality having had expired.
Issue: WON the petitioners, the successors-in-interest of the defunct Central Syndicate, can be hel personally liable for the sales taxes.
Petitioners are the beneficiaries of the defunct corporation and as such should be held liable to pay the taxes. However, there being no express provision requiring the stockholders of the corporation to be solidarily liable for its debts which liability must be express cannot be presumed, petitioners should be held liable for the tax in question only in proportion to their shares in the distribution of the assets of the defunct corporation.
Lutz vs. Araneta (CIR)
Facts: Lutz, in his capacity as judicial administrator of the intestate estate of a certain Ledesma, assails the constitutionality of the imposition of export taxes under Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act. Lutz alleges that the same is unconstitutional and void, being levied for the aid of the sugar industry exclusively, which in his opinion is not a pub;lic purpose for which a tax may be constitutionally levied. The action was dismissed by the CFI.
Issue: WON the imposition of the tax in question is unconstitutional, not being levied for public purpose.
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. It was competent for the legislature to find that the general welfare demanded that the sugar industry should be stabilized.
Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of tax money to experimental stations to seek increase of efficiency in sugar production, utilization of by-products and solution of allied problems, as well as to the improvements of living and working conditions in sugar mills or plantations, without any part of such money being channeled directly to private persons, constitutes expenditure of tax money for private purposes.