Case Digests
Case Digests
Taxation Law
Taxation Law
TABLE OF CONTENTS
TABLE OF CONTENTS
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Republic of of the the Phil. Phil. vs. vs. Court Court of of AppealsAppeals G.R. No. 109193, February 1,
G.R. No. 109193, February 1, 2000...2000... 22
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P!"Fa#ily $avi%&s a%' vs. Court of Appeals P!"Fa#ily $avi%&s a%' vs. Court of Appeals G.R. No. 122()0, A
G.R. No. 122()0, April 12, 2000 ...pril 12, 2000 ... ...2...2
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Cya%a#i* Phil., !%c. vs. Court of Appeals, et al. Cya%a#i* Phil., !%c. vs. Court of Appeals, et al. G.R. No.
G.R. No. 10)0+10)0+, , -a%uary 20, 2000...-a%uary 20, 2000...33
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Protectors $ervices vs. Court of Appeals, et al. Protectors $ervices vs. Court of Appeals, et al. GR
GR No. No. 1111)1+, April 12, )1+, April 12, 2000...2000...((
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Co##issio%er of !%ter%al Reve%ue vs. Court of Appeals Co##issio%er of !%ter%al Reve%ue vs. Court of Appeals G.R. No. 12320
G.R. No. 12320+, /arch 22, 2000 ...+, /arch 22, 2000 ... ...
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Co##issio%er of !%ter%al Reve%ue vs. Court of Appeals Co##issio%er of !%ter%al Reve%ue vs. Court of Appeals G.R. No.123
G.R. No.123, /arch 30, 2000..., /arch 30, 2000... ... ++
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he ureau of Custo#s he co%o#ic !%telli&e%ce ureau vs. 4&ario he ureau of Custo#s he co%o#ic !%telli&e%ce ureau vs. 4&ario /o%teliba
/o%teliba%o G.R. No. %o G.R. No. 13)0)13)0)1, /arch 30, 2000...1, /arch 30, 2000... ++
)TA! A"NEST#+ D&S'OS&T&ON OF CA'&TAL ASSET ON CAS) BAS&S *S
)TA! A"NEST#+ D&S'OS&T&ON OF CA'&TAL ASSET ON CAS) BAS&S *S
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ibia%o 5
ibia%o 5. . a6as, -ra6as, -r. . vs. Court vs. Court of of Appeals, Appeals, et et al.al. G.R. No. 1029+, February 10,
G.R. No. 1029+, February 10, 2000...2000...
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& TA! AD"&N&ST$AT&*E $E(%LAT&ONS
7arriso%
7arriso% /otors /otors Corporatio% Corporatio% vs. vs. Rachel Rachel A. A. NavarroNavarro G.R. No. 1322+9, Ap
G.R. No. 1322+9, April 2, 2000...ril 2, 2000... ...))
, ACTS OF -&T))OLD&N( A(ENTS OF A (O*E$N"ENT CO$'O$AT&ON
, ACTS OF -&T))OLD&N( A(ENTS OF A (O*E$N"ENT CO$'O$AT&ON
A8uce%a
A8uce%a . Garcia vs. Garcia vs. 4ffice . 4ffice of the 4#of the 4#bu*s#a%bu*s#a%, et al., et al. G.R. No. 1210, February 1+, 2000...
A Tax Anest
$E'%BL&C OF T)E ')&L&''&NES 7s CO%$T OF A''EALS
($ No 108189
Fe5rar :. 2000
Fa3ts+
!% 199, the !R issue* a% assess#e%t %otice a%* letter a&ai%st private respo%*e%t Precisio% Pri%ti%& *e#a%*i%& pay#e%t of the *eficie%cy i%co#e ta for 19)1 i%clusive of i%terest. :espite repeate* *e#a%*s, ho;ever, the latter faile* to pay ;ithi% the perio* prescribe* by la;. Co%se<ue%tly, sai* assess#e%t beca#e fi%al a%* *e#a%*able. 4% 4ctober 31, 19)+, private respo%*e%t file* a a A#%esty Retur% pursua%t to ecutive 4r*er No. (1 ;hich *eclare* a o%e ti#e ta a#%esty coveri%& u%pai* i%co#e taes for the years 19)1 to 19).!% 1990, !R file* a co#plai%t a&ai%st Precisio% Pri%ti%& for the collectio% of the sai* *eficie%cy i%co#e ta. he for#er a%chors its sub#issio% o% the fact that the latter ;as alrea*y assesse* of its ta *eficie%cy prior to the pro#ul&atio% of Rev. Re&. ("), ;hich i#ple#e%te* .4. No. (1. Private respo%*e%t receive* the assess#e%t i% 19) ;hile the sai* Rev. Re&. (") eplicitly refers o%ly to assess#e%ts #a*e after Au&ust 21, 19)+. Private respo%*e%t co%te%*s that it is %ot liable for such ta *eficie%cy because it availe* of the ta a#%esty u%*er .4. No. (1.
&sse+
!s the ta a#%esty u%*er .4. No. (1 coveri%& u%pai* i%co#e taes for the years 19)1 to 19) eti%&uishes the ta liabilities alrea*y assesse* eve% prior to its effectivity=)eld+
>es. .4. No. (1 *eclari%& a ta a#%esty o% u%pai* i%co#e taes ;as pro#ul&ate* o% Au&ust 22, 19)+, it ;as later a#e%*e* by .4. Nos. ( a%* +( to i%clu*e estate a%* *o%ors taes a%* taes o% busi%ess for the taable year 19)1"19). hereafter, Rev. Re&. (") ;as issue* to i#ple#e%t the la;. !t rec'o%e* the applicability of the ta a#%esty fro# Au&ust 22, 19)+, the *ate ;he% .4. No. (1 too' effect. 7o;ever, .4. No. (1 co%tai%e* %o li#itatio% ;hatsoever *eli#iti%& its applicability to assess#e%ts #a*e prior to its coveri%& all ta liabilities i%curre* fro# 19)1"19). !f the .4. No. (1 ha* %ot bee% i%te%*e* to i%clu*e 19)1" 19) ta liabilities alrea*y assesse* prior to 22 Au&ust 19)+, the la; ;oul* have si#ply provi*e* i% its eclusio%ary clauses. !t *i* %ot. herefore, the co%clusio% is u%avoi*able, a%* it is that the eecutive or*er has bee% *esi&%e* to be i% the %ature of a &e%eral &ra%t of ta a#%esty sub?ect o%ly to cases specifically ecepte* by it.B Tax $efnd
B'&;FA"&L# SA*&N(S BAN< 7s CO%$T OF A''EALS
($ No 122=>0
April 12. 2000
Fa3ts+
Petitio%er i%*icate* i% its 19)9 !%co#e a Retur% that it ;oul* apply the total refu%*able a#ou%t, i%clusive of the 19)) a%* 19)9 ta cre*it, as a ta cre*it for the succee*i%& taable year, 1990. @ater, petitio%er i%for#e* the !R that it ;oul* clai# the a#ou%t state* as the 19)9 ta cre*it as a ta refu%*, alle&i%& that it *i* %ot apply the total refu%*able a#ou%t to its 1990 A%%ual !R or other ta liabilities *ue to alle&e* busi%ess losses it i%curre* for the sa#e year. he% %o actio% fro# the !R ;as forthco#i%&, petitio%er file* its clai# ;ith the Court of a Appeals. 7o;ever, the CA a%* the CA *e%ie* the clai# for ta refu%*.he respo%*e%ts rule* that there is %o basis to &ra%t the clai# for refu%* *ue to petitio%ers failure to sho; proof that it has %ot cre*ite* to its 1990 !R the total
Pa&e 2
refu%*able a#ou%t it previously *eclare* to be applie* as a ta cre*it i% 1990. $i%ce ta refu%*s are i% the %ature of ta ee#ptio%s, they are re&ar*e* as i% *ero&atio% of soverei&% authority a%* to be co%strue* strictissi#i ?uris a&ai%st the o%e clai#i%& the ee#ptio%. he petitio%er #ai%tai%e* that it suffere* a %et loss i% 1990 a%* that it coul* %ot have applie* the a#ou%t clai#e* as ta cre*its.
&sse+
!s a tapayer e%title* to a refu%*, represe%ti%& ecess cre*itable ;ithhol*i%& ta pai* for the previous year, eve% if it fails to prove that it has %ot applie* the sa#e as ta cre*it for the year it i%curre* a loss=)eld+
>es. !t is u%*ispute* that petitio%er ha* ecess ;ithhol*i%& taes for the year 19)9 a%* ;as thus e%title* to a refu%*. Pursua%t to $ec. +9 of the 19)+ a Co*e ;hich state* that a corporatio% e%title* to a refu%* #ay opt either E1 to obtai% such refu%* or E2 to cre*it sai* a#ou%t for the succee*i%& taable year.!% the prese%t case, the Retur% clearly sho;e* that petitio%er suffere* a %et loss i% 1990. Co%trary to the hol*i%& of the CA a%* the CA, petitio%er coul* %ot have applie* the a#ou%t as a ta cre*it.
!t shoul* be stresse* that the ratio%ale of the rules of proce*ure is to secure a ?ust *eter#i%atio% of every actio%. hey are tools *esi&%e* to facilitate the attai%#e%t of ?ustice.
ut there ca% be %o ?ust *eter#i%atio% of the prese%t actio% if ;e i&%ore, o% &rou%*s of strict tech%icality, the Retur% sub#itte* before the CA a%* eve% before this Court. o repeat, the u%*ispute* fact is that petitio%er suffere* a %et loss i% 1990B accor*i%&ly, it i%curre* %o ta liability to ;hich the ta cre*it coul* be applie*. Co%se<ue%tly, there is %o reaso% for the !R a%* this Court to ;ithhol* the ta refu%* ;hich ri&htfully belo%&s to the petitio%er.
C &properl A33lated Earnings Tax
C#ANA"&D ')&L. &NC 7s CO%$T OF A''EALS. ET AL
($ No 10>0@:
,anar 20. 2000
Fa3ts+
Petitio%er, Cya%a#i* Philippi%es, !%c., is a corporatio% e%&a&e* i% the #a%ufacture of phar#aceutical pro*ucts a%* che#icals, a ;holesaler of i#porte* fi%ishe* &oo*s, a%* a% i#porteri%*e%tor. he C!R se%t a% assess#e%t letter to petitio%er Cya%a#i* Phil., !%c. a%* *e#a%*e* the pay#e%t of *eficie%cy i%co#e ta for 19)1. Petitio%er the% proteste* the assess#e%ts, particularly, E1 the 2H $urta Assess#e%tB E2 the 19)1 :eficie%cy !%co#e Assess#e%tB a%* E3 the 19)1 :eficie%cy Perce%ta&e Assess#e%t. Petitio%er clai#e* that the surta for the u%*ue accu#ulatio% of ear%i%&s ;as %ot proper because the sai* profits ;ere retai%e* to i%crease petitio%ers ;or'i%& capital a%* it ;oul* be use* for reaso%able busi%ess %ee*s of the co#pa%y. he C!R, ho;ever, refuse* to allo; the ca%cellatio% of the assess#e%t %otices. Petitio%er appeale* to the CA. :uri%& the pe%*e%cy of the case, both parties a&ree* to co#pro#ise the 19)1 :eficie%cy !%co#e Assess#e%t. 7o;ever, the surta o% i#properly accu#ulate* profits re#ai%e* u%resolve*.&sse+
!s a #a%ufacturi%& co#pa%y liable for the accu#ulate* ear%i%&s ta, *espite its clai# that ear%i%&s ;ere accu#ulate* to i%crease ;or'i%& capital a%* to be use* for its reaso%able %ee*s, if it fails to prese%t evi*e%ce to prove such alle&atio%s=)eld+
>es. he respo%*e%t court correctly *eci*e* that the petitio%er is liable for the accu#ulate* ear%i%&s ta for the year 19)1 base* o% the follo;i%& &rou%*sIPa&e 3
1. he a#e%*atory provisio% of $ec. 2 of the 19 N!RC, ;hich ;as P: 139, e%u#erate* the corporatio%s ee#pt fro# the i#positio% of i#properly accu#ulate* ta such as ba%'s, %o%"ba%' fi%a%cial i%ter#e*iaries, i%sura%ce co#pa%ies a%* corporatio%s authori8e* by the Ce%tral a%' of the Phils. to hol* shares of stoc's of ba%'s. he petitio%er *oes %ot fall a#o%& those ee#pt classes.
2. !f the C!R *eter#i%e* that the corporatio% avoi*e* the ta o% sharehol*ers by per#itti%& ear%i%&s or profits to accu#ulate, a%* the tapayer co%teste* such a *eter#i%atio%, the bur*e% of provi%& is o% the tapayer. A%* i% or*er to *eter#i%e ;hether profits are accu#ulate* for the reaso%able %ee*s of the busi%ess to avoi* the surta upo% sharehol*ers, it #ust be sho;% that the co%trolli%& i%te%tio% of the tapayer is #a%ifeste* at the ti#e of accu#ulatio%, %ot i%te%tio%s *eclare* subse<ue%tly, ;hich are #ere afterthou&hts. Further#ore, the accu#ulate* profits #ust be use* ;ithi% a reaso%able ti#e after the close of the taable years. !% this case, petitio%er *i* %ot establish, by clear a%* co%vi%ci%& evi*e%ce ;he% such accu#ulatio% of profit ;as for the i##e*iate %ee*s of the busi%ess.
3. @astly, i% the prese%t case, the a Court opte* to *eter#i%e the ;or'i%& capital sufficie%cy by usi%& the ratio bet;ee% curre%t assets to curre%t liabilities. he ;or'i%& capital %ee*s of a busi%ess *epe%* upo% the %ature of the busi%ess, its cre*it policies, the a#ou%t of i%ve%tories, the rate of tur%over, the a#ou%t of accou%ts receivable, the collectio% rate, the availability of cre*it to the busi%ess, a%* si#ilar factors. Petitio%er, by a*heri%& to the Jbar*ahlK for#ula, faile* to i#press the ta court ;ith the re<uire* *efi%ite%ess e%visio%e* by the statute. e a&ree ;ith the ta court that the bur*e% of proof to establish that the profits accu#ulate* ;ere %ot beyo%* the reaso%able %ee*s of the co#pa%y, re#ai%e* o% the tapayer. 7e%ce, this Court ;ill %ot set asi*e li&htly the co%clusio% reache* by the CA, ;hich by the very %ature of its fu%ctio%, is *e*icate* eclusively to the co%si*eratio% of ta proble#s a%* has %ecessarily *evelope* epertise o% the sub?ect u%less there has bee% a% abuse of i#provi*e%t eercise of authority.
D 'er3entage Tax
'$OTECTO$S SE$*&CES 7s CO%$T OF A''EALS. ET AL
($ No 11>1:@. April 12. 2000
Fa3ts+
Petitio%er ;as assesse* for *eficie%cy perce%ta&e taes i%clu*i%& surchar&es, pe%alties a%* i%terests thereo% for the year 19)3, 19)( a%* 19). Petitio%er file* a protest a&ai%st the assess#e%t clai#i%& that its &ross receipts sub?ect of perce%ta&e taes shoul* eclu*e the salaries of the security &uar*s as ;ell as the e#ployers share of $$$ a%* $tate !%sura%ce Fu%* a%* /e*icare co%tributio%s. !R :eputy Co##issio%er *e%ie* ;ith fi%ality the latters protest a&ai%st the sub?ect assess#e%t hol*i%& that the salaries pai* to security &uar*s for# part of the taable &ross receipts i% the *eter#i%atio% of the 3H a%* (H co%tractors ta. Petitio%er file* a petitio% for revie; before the Court of a Appeals ECA,&sse+
:oes the ter# J&ross receiptsK of a co%tractor sub?ect to perce%ta&e ta i%clu*e the salaries pai* to its e#ployees, its $$$, $!R a%* /e*icare co%tributio%s=)eld+
>es. he ter# J&ross receiptsK #ea%s all a#ou%ts receive* by the pri%cipal co%tractor as the total price, u%*i#i%ishe* by the a#ou%t pai* to the subco%tractor u%*er a subco%tractor arra%&e#e%t. 7e%ce, &ross receipts coul* %ot be *i#i%ishe* by the e#ployers $$$, $!F a%* /e*icare co%tributio%s. he !R has co%siste%tly hel* that salaries of security &uar*s for# part of the taable &ross receiptsPa&e (
of a security a&e%cy for purposes of the (H co%tractors ta. $i%ce the salaries of the security &uar*s are actually the liability of the a&e%cy a%* that the &uar*s are co%si*ere* their e#ployees. 7e%ce, for perce%ta&e ta purposes, the salaries of the security &uar*s are i%clu*ible i% its &ross receipts.
E Ded3tions fro t4e (ross Estate
CO""&S&ONE$ OF &NTE$NAL $E*EN%E 7s CO%$T OF A''EALS
($ No 12920@
"ar34 22. 2000
Fa3ts+
Respo%*e%t heirs of Pe*ro Pa?o%ar, eecute* etra?u*icial settle#e%t of the latters estate. Pursua%t to the assess#e%ts of the !R for *eficie%cy ta, they pai* the estate taes. @ater the a*#i%istrator file* a protest see'i%& the refu%* of the erro%eously pai* estate taes or so#e portio% of it. ithout the resolutio% of the protest, a petitio% for revie; ;as the% file* ;ith the CA, ;hich or*ere* the C!R to refu%* the heirs. A#o%& the *e*uctio%s fro# the &ross estate allo;e* by the CA ;ere the a#ou%ts represe%ti%& the Procee*i%&s No. 12( for &uar*ia%ship over the perso% a%* property of the *ece*e%t ;hile he ;as still alive.he C!R assaile* the *ecisio% co%te%*i%& that the %otarial fee for tra?u*icial $ettle#e%t a%* the attor%eys fees i% the &uar*ia%ship procee*i%&s are %ot *e*uctible epe%ses. !t #ai%tai%s that o%ly ?u*icial epe%ses of the testa#e%tary or i%testate procee*i%&s are allo;e* as *e*uctio% to &ross estate.
&sse+
Are the %otarial fee pai* for the etra?u*icial settle#e%t a%* the attor%eys fees i% the &uar*ia%ship procee*i%&s allo;e* as *e*uctio%s fro# the &ross estate of the *ece*e%t i% or*er to arrive at the value of the %et estate=)eld+
>es. Althou&h the ta co*e specifies J?u*icial epe%ses of the testa#e%tary or i%testate procee*i%&sK, there is %o reaso% ;hy epe%ses i%curre* i% the a*#i%istratio% a%* settle#e%t of the estate i% etra?u*icial procee*i%&s shoul* %ot be allo;e*. 7o;ever, *e*uctio% is li#ite* to such a*#i%istratio% epe%ses as are actually a%* %ecessarily i%curre* i% the collectio% of the assets of the estate, pay#e%t of the *ebts, a%* *istributio% of the re#ai%*er a#o%& those e%title* thereto.!t is clear that the etra?u*icial settle#e%t ;as for the purpose of pay#e%t of taes a%* the *istributio% of the estate to the heirs. he eecutio% of the etra?u*icial settle#e%t %ecessitate* the %otari8atio% of the sa#e. !t follo;s the% that the %otarial fee ;as i%curre* pri#arily to settle the estate of the *ecease* Pa?o%ar. $ai* a#ou%t shoul* the% be co%si*ere* as a*#i%istratio% epe%se actually a%* %ecessarily i%curre* i% the collectio% of assets of the estate, pay#e%t of *ebts a%* *istributio% of the re#ai%*er a#o%& those e%title* thereto.
Attor%eys fees o% the other ha%* to be *e*uctible fro# the &ross estate #ust be esse%tial to the settle#e%t of the estate. he a#ou%t clai#e* as *e*uctible ;as i%curre* as attor%eys fees i% the &uar*ia%ship procee*i%&s. he &uar*ia%ship procee*i%& i% this case ;as %ecessary for the *istributio% of the property of the *ecease*. As correctly poi%te* out by the respo%*e%t CA, the PN ;as appoi%te* &uar*ia% over the assets of the *ecease*, a%* that assets of the *ecease* for# part of his &ross estate.
Pa&e
F *ale Added Tax
CO""&S&ONE$ OF &NTE$NAL $E*EN%E 7s CO%$T OF A''EALS
($ No 129
"ar34 90. 2000
Fa3ts+
he !R issue* a% assess#e%t to private respo%*e%t corporatio% for the *eficie%cy value"a**e* ta for taable year 19)). he corporatio% averre* that si%ce it ;as %ot e%&a&e* i% busi%ess, it ;as %ot liable to pay 5A. Further#ore, it co%te%*e* that the ter# Ji% the course of tra*e or busi%essK re<uire* that the Jbusi%essK be carrie* o% ;ith a vie; of profit. $i%ce the services it offers ;ere o% a J%o%"profit basisK, thus, J%ot e%&a&e* i% busi%essK. he petitio%er ho;ever avers that 5A is a ta o% the value a**e* by the perfor#a%ce of the service. !t is i##aterial ;hether profit is *erive* i% re%*eri%& the service.&sse+
:oes the phrase Ji% the course of tra*e or busi%essK i#ply that the tra%sactio%s shoul* be #otivate* by profit=)eld+
No. he phrase Ji% the course of tra*e or busi%essK #ea%s the re&ular co%*uct or pursuit of a co##ercial or a% eco%o#ic activity, i%clu*i%& tra%sactio%s i%ci*e%tal thereto, by a%y perso% re&ar*less of ;hether or %ot the perso% e%&a&e* therei% is a %o%"stoc', %o%"profit or&a%i8atio% or &over%#e%t e%tity.5A is a ta o% tra%sactio%s, i#pose* o% every sta&e of *istributio% process o% the sale, barter, echa%&e of &oo*s or property, a%* o% the perfor#a%ce of services, eve% i% the abse%ce of profit attributable thereto.
NOTE+
PR$4N @!A@ 4 5AIJA%y perso% ;ho i% the course of tra*e or busi%ess, sells, barters, echa%&es, leases &oo*s or properties, re%*ers services, a%* a%y perso% ;ho i#ports &oo*s. E$ec. 10 of N!RC
( Forfeitre pro3eedings in t4e Brea of Cstos
T)E B%$EA% OF C%STO"S T)E ECONO"&C &NTELL&(ENCE B%$EA%
7s
O(A$&O "ONTEL&BANO
($ No 19>0>1
"ar34 90. 2000
Fa3ts+
A :istrict Collector of Custo#s issue* a ;arra%t of sei8ure a%* *ete%tio% of 2,000 ba&s of rice o% the basis of the report that the rice ha* bee% ille&ally i#porte*. he e%forcers of the sei8ure or*er alle&e* that the #e%tio%e* rice ;as s#u&&le* abroa* ;ithout eve% proof that the sa#e ;ere purchase* fro# a particular cou%try. he co%si&%ee a%* his buyer file* a co#plai%t for i%?u%ctio% i% the Re&io%al rial Court ERC alle&i%& that the *efe%*a%ts are #erely suspicious a%* the *ete%tio% ;as ille&al for lac' of basis a%* i% fact. he petitio%ers sou&ht the *is#issal of the co#plai%t o% the &rou%* that the RC has %o ?uris*ictio% over the sub?ect #atter of co%troversy by virtue of the ;ell"settle* provisio%s of the ariff a%* Custo#s Co*e a%* Act No. 112, as a#e%*e*, other;ise '%o;% as JA% Act Creati%& the Court of a AppealsK.&sse+
:oes RC have ?uris*ictio% to e%?oi% the forfeiture procee*i%&s i% the ureau of Custo#s=Pa&e +
)eld+
No. he RCs are *evoi* of a%y co#pete%ce to pass upo% the vali*ity or re&ularity of sei8ure a%* forfeiture procee*i%&s co%*ucte* by the ureau of Custo#s a%* to e%?oi% or other;ise to i%terfere ;ith these procee*i%&s. he <uestio% of ;hether probable cause eists for the sei8ure is %ot for the RC to *eter#i%e. he Collector of Custo#s has eclusive ?uris*ictio% to hear a%* *eter#i%e all <uestio%s touchi%& o% the sei8ure a%* forfeiture of *utiable &oo*s. he RC is preclu*e* fro# assu#i%& co&%i8a%ce over such #atters eve% throu&h petitio%s of certiorari, prohibitio% or #a%*a#us. he actio%s of the Collector of Custo#s are appealable to the Co##issio%er of Custo#s, ;hose *ecisio% i% tur%, is sub?ect to the eclusive appellate ?uris*ictio% of the Court of a Appeals a%* fro# there to the Court of Appeals.he RCs have %o revie; po;ers over such procee*i%&s to avoi* u%%ecessary hi%*ra%ce o% the &over%#e%ts *rive, %ot o%ly to preve%t s#u&&li%& a%* other frau* fro# Custo#s, but #ore i#porta%tly, to re%*er effective a%* efficie%t the collectio% of i#port a%* eport *uties *ue the $tate, ;hich e%ables the &over%#e%t to carry out its fu%ctio%s.
NOTE+
ve% if it is assu#e* that i% the eercise of the eclusive co#pete%ce, a tai%t of ille&ality #ay be correctly i#pute*, the #ost that ca% be sai* is that u%*er certai% circu#sta%ces the &rave abuse of *iscretio% #ay oust it of such ?uris*ictio% it see% fit to *o so. EPo%ce %rile vs. 5i%uya, 2 $CRA 3)1) Tax Anest
Disposition of 3apital asset on 3as4 5asis 7s on installent
B&B&ANO * BAAS. ,$ 7s CO%$T OF A''EALS. ET AL
($ No 1028@:
Fe5rar 10. 2000
Fa3ts+
4% February 20, 19+, Petitio%er sol* to A>A@A a parcel of la%* for P2,30),0.00. Petitio%er receive* a% i%itial pay#e%t a#ou%ti%& to P(+1,(.00 ;ith the bala%ce to be pai* i% four e<ual co%secutive a%%ual i%stall#e%ts covere* by pro#issory %ote. he sa#e *ay, petitio%er *iscou%te* the pro#issory %ote ;ith A>A@A, for its face value. A>A@A issue* %i%e E9 chec's to petitio%er, all *ate* February 20, 19+, ;ith the u%ifor# a#ou%t of P20,22(.00.!% his 19+ !%co#e a Retur%, petitio%er reporte* o%ly the i%itial pay#e%t as i%co#e fro# *ispositio% of capital asset. !% the succee*i%& years, u%til 199, petitio%er reporte* a u%ifor# i%co#e correspo%*i%& to the a%%ual i%stall#e%t as &ai% fro# sale of capital asset.
@ater, the !R Re&io%al :irector, throu&h its ta ea#i%ers, *iscovere* that petitio%er ha* %o outsta%*i%& receivable fro# the 19+ la%* sale to A>A@A a%* co%clu*e* that the sale ;as cash a%* the e%tire profit shoul* have bee% taable i% 19+.
Petitio%er ;as assesse* *eficie%cy ta ;ith surchar&es a%* pe%alties for the year 19+. A *e#a%* letter ;as the% issue* for the settle#e%t of the i%co#e ta *eficie%cy. Petitio%er faile* to pay a%* i%siste* that the sale of his la%* to A>A@A ;as o% i%stall#e%t.
4% -u%e 1, 19)1, a cri#i%al co#plai%t for ta evasio% ;as file* a&ai%st petitio%er.
4% -uly 2, 19)1, petitio%er file* a% A#%esty a Retur% u%*er P. :. 1(0. @i'e;ise, o% Nove#ber 2, 19)1, petitio%er a&ai% file* a% A#%esty a Retur% u%*er P.:. 1)(0. !% both, petitio%er *i* %ot reco&%i8e that his sale of la%* to A>A@A ;as o% cash basis.
Petitio%er #ai%tai%s that the procee*s of the pro#issory %otes, %ot yet *ue, ;hich he *iscou%te* to A>A@A shoul* %ot be i%clu*e* as i%co#e reali8e* i% 19+.
Petitio%er states that the ori&i%al a&ree#e%t i% the :ee* of $ale shoul* %ot be affecte* by the subse<ue%t *iscou%ti%& of the bill.
Pa&e
&sses+
1. :oes the #ere fili%& of ta a#%esty retur% u%*er P.:. 1(0 a%* 1)(0 ipso "acto shiel* a tapayer fro# i##u%ity a&ai%st prosecutio%=
2. $houl* petitio%ers i%co#e fro# the sale of la%* be *eclare* as a cash tra%sactio% i% his ta retur% because the buyer *iscou%te* the pro#issory %ote, issue* to the seller, o% the sa#e *ay of the sale=
)eld+
1. No. he petitio%er is %ot e%title* to the be%efits of P.:. Nos. 1(0 a%* 1)(0. he #ere fili%& of ta a#%esty retur% u%*er P.:. 1(0 a%* 1)(0 *oes %ot ipso "acto shiel* hi# fro# i##u%ity a&ai%st prosecutio%. a a#%esty is a &e%eral par*o% to tapayers ;ho ;a%t to start a clea% ta slate. !t also &ives the &over%#e%t a cha%ce to collect u%collecte* ta fro# ta eva*ers ;ithout havi%& to &o throu&h the te*ious process of a ta case. o avail of a ta a#%esty &ra%te* by the &over%#e%t, a%* to be i##u%e fro# suit o% its *eli%<ue%cies, the tapayer #ust have volu%tarily *isclose* his previously u%tae* i%co#e a%* #ust have pai* the correspo%*i%& ta o% such previously u%tae* i%co#e.P: 1(0 a%* P: 1)(0 &ra%te* a%y i%*ivi*ual, ;ho volu%tarily files a retur% u%*er this :ecree a%* pays the i%co#e ta *ue thereo%, i##u%ity fro# the pe%alties, civil or cri#i%al, u%*er the N!RC. Petitio%er is %ot e%title* to clai# i##u%ity fro# prosecutio% u%*er the shiel* of availi%& ta a#%esty. 7is *isclosure i% his ta a#%esty retur% *i* %ot i%clu*e the i%co#e fro# his sale of la%* to A>A@A o% cash basis. !%stea* he i%siste* that such sale ;as o% i%stall#e%t. 7e *i* %ot a#e%* his i%co#e ta retur%. 7e *i* %ot pay the ta ;hich ;as co%si*erably i%crease* by the i%co#e *erive* fro# the *iscou%ti%&. 7e *i* %ot #eet the t;i% re<uire#e%ts of P.:. 1(0 a%* 1)(0, *eclaratio% of his u%tae* i%co#e a%* full pay#e%t of ta *ue thereo%.
!t also bears %oti%& that a ta a#%esty, #uch li'e a ta ee#ptio%, is %ever favore* %or presu#e* i% la; a%* if &ra%te* by statute, the ter#s of the a#%esty li'e that of a ta ee#ptio% #ust be co%strue* strictly a&ai%st the tapayer a%* liberally i% favor of the tai%& authority.
2. >es. he &e%eral rule is that the ;hole profit accrui%& fro# a sale of property is taable as i%co#e i% the year the sale is #a*e. ut, if %ot all of the sale price is receive* *uri%& such year, a%* a statute provi*es that i%co#e shall be taable i% the year i% ;hich it is Lreceive*,L the profit fro# a% i%stall#e%t sale is to be apportio%e* bet;ee% or a#o%& the years i% ;hich such i%stall#e%ts are pai* a%* receive*.
!% this case, althou&h the procee*s of a *iscou%te* pro#issory %ote is %ot co%si*ere* i%itial pay#e%t, still it #ust be i%clu*e* as taable i%co#e o% the year it ;as co%verte* to cash. he% petitio%er ha* the pro#issory %otes coveri%& the succee*i%& i%stall#e%t pay#e%ts of the la%* issue* by A>A@A, *iscou%te* by A>A@A itself, o% the sa#e *ay of the sale, he lost e%title#e%t to report the sale as a sale o% i%stall#e%t si%ce, a taable *ispositio% resulte* a%* petitio%er ;as re<uire* by la; to report i% his retur%s the i%co#e *erive* fro# the *iscou%ti%&. hat petitio%er *i* is ta%ta#ou%t to a% atte#pt to circu#ve%t the rule o% pay#e%t of i%co#e taes &ai%e* fro# the sale of the la%* to A>A@A for the year 19+. /iss*a
& Tax Adinistrati7e $eglations
)A$$&SON "OTO$S CO$'O$AT&ON 7s $AC)EL A NA*A$$O
($ No 1922@8
April 2:. 2000
Fa3ts+
Petitio%er, a '%o;% i#porter, asse#bler a%* #a%ufacturer, sol* to private respo%*e%t 2 truc's.$ubse<ue%tly, a /e#ora%*u# of A&ree#e%t ;as e%tere* i%to by the !R a%* the @4, ;hich provi*e* that prior to re&istratio% of a%y asse#ble* or re"asse#ble* #otor vehicle ;hich use* i#porte* parts, a Certificate of Pay#e%t shoul* first be obtai%e* fro# the !R to prove pay#e%t of all taes.
Pa&e )
Co%se<ue%tly, &over%#e%t a&e%ts sei8e* a%* *etai%e* the sai* truc's *ue to %o%"pay#e%t of !R taes a%* custo# *uties, ;hich pro#pte* private respo%*e%t Ebuyer to secure fro# petitio%er the receipts evi*e%ci%& pay#e%t. 7o;ever, the latter i&%ore* sai* re<uest. Private respo%*e%t the% pai* the taes a%* custo# *uties ;ith a ;ar%i%& that petitio%er shoul* rei#burse her the sa#e. Petitio%er ar&ues that it ;as %o lo%&er obli&e* to pay for the a**itio%al taes a%* custo# *uties i#pose* o% the i#porte* co#po%e%t parts by the a*#i%istrative re&ulatio%s si%ce such re&ulatio%s o%ly too' effect after the eecutio% of its co%tract ;ith private respo%*e%t. o hol* it liable ;oul* %ot o%ly violate the %o%"i#pair#e%t clause of the Co%stitutio% but also the pri%ciple of %o%"retroactivity of la;s u%*er the Civil Co*e. Petitio%er further clai#e* that private respo%*e%t shoul* be the o%e to pay the taes a%* *uties si%ce ;he% the re&ulatio%s too' effect, it %o lo%&er o;%e* the truc's.
&sses+
1 :i* the a*#i%istrative re&ulatio%s i#pose a**itio%al taes that i#pair the obli&atio%s of co%tracts a%* violate the pri%ciple of %o%"retroactivity=2 !s the i#porter"asse#bler#a%ufacturer liable to pay the !R taes a%* custo# *uties, ;hich the a*#i%istrative re&ulatio%s sou&ht to e%force=
)eld+
1 No. hat $ec. 10, Art. !!! of the Co%stitutio% prohibits is the passa&e of a la; ;hich e%lar&es, abri*&es or i% a%y #a%%er cha%&es the i%te%tio% of the co%tracti%& parties. he /e#ora%*u# 4r*ers a%* the t;o E2 /e#ora%*a of A&ree#e%t *o %ot i#pose a%y a**itio%al taes, ;hich ;oul* u%*uly i#pair the co%tract of sale bet;ee% petitio%er a%* private respo%*e%t. !%stea*, these a*#i%istrative re&ulatio%s ;ere passe* to e%force pay#e%t of eisti%& !R taes a%* custo#s *uties at the ti#e of i#portatio%. hile it is true that a*#i%istrative ruli%&s a%* re&ulatio%s are &e%erally prospective i% %ature, a% i%spectio% of the 2 /4A, ho;ever *e#o%strates that their i%te%t is to e%force pay#e%t of taes o% asse#blers ;ho i#port co#po%e%t arts ;ithout payi%& the correct assess#e%ts.2 >es. Althou&h private respo%*e%t is the o%e re<uire* by the a*#i%istrative re&ulatio%s to secure the Certificate of Pay#e%t for the purpose of re&istratio%, petitio%er as the i#porter a%* the asse#bler#a%ufacturer of the t;o E2 lf truc's is still the o%e liable for pay#e%t of reve%ue taes a%* custo# *uties. Petitio%ers obli&atio% to pay *oes %ot arise fro# the a*#i%istrative re&ulatio%s but fro# the ta la;s eisti%& at the ti#e of i#portatio%.
!t is also <uite obvious that as bet;ee% petitio%er, ;ho is the i#porter" asse#bler#a%ufacturer, a%* private respo%*e%t, ;ho is #erely the buyer, it is petitio%er ;hich has the obli&atio% to pay taes to the !R a%* the 4C. Petitio%er ;oul* be u%?ustly e%riche* if private respo%*e%t shoul* be *e%ie* rei#burse#e%t. !t ;oul* i%e<uitably a#ass profits fro# selli%& asse#ble* truc's eve% if it *i* %ot pay the taes *ue o% its i#porte* spare parts. !#posi%& the ta bur*e% o% private respo%*e%t ;oul* o%ly e%coura&e the proliferatio% of s#u&&lers ;ho sche#e to eva*e taes by passi%& o% their ta obli&atio%s to their u%suspecti%& buyers.
, A3ts of -it44olding Agents of a (o7ernent Corporation
A%CENA B (A$C&A 7s OFF&CE OF T)E O"B%DS"AN. ET AL
($ No 12::10 Fe5rar 1@. 2000
Fa3ts+
Petitio%er ;as :ept. /&r. !!! for a*#i%istratio% of the Natio%al :evelop#e%t Co#pa%y EN:C, a &over%#e%t corporatio%. !% 1991, N:C i%itiate* a pro&ra# of early retire#e%t of its perso%%el. hose ;ho availe* the#selves of early retire#e%t or separatio% ;ere &ive% ta"ee#pt retire#e%t a%* separatio% be%efits. !% /arch 199, petitio%er availe* herself of the pro&ra#, a%* applie* for early retire#e%t u%*er RA1+1+. N:C approve* the applicatio%, a%* i% *ue course pai* petitio%er her retire#e%t be%efits. 7o;ever, privatePa&e 9
*e*ucte* ;ithhol*i%& ta o% the a#ou%t of provi*e%t fu%* be%efits &ive% to petitio%er correspo%*i%& to her share over a%* above her perso%al co%tributio%.
Petitio%er proteste* private respo%*e%tsM actio% a%* re<ueste* the# to refu%* the taes ;ithhel* a%* re#itte* to the !R, clai#i%& that such a#ou%t ;as ta ee#pt. :ue to private respo%*e%tsM refusal to &ra%t her re<uest, o% /arch ), 199+ petitio%er file* ;ith the 4#bu*s#a% a co#plai%t a&ai%st the# for violatio% of $ec. 3 Ee of RA 3019, for causi%& her u%*ue i%?ury. he 4#bu*s#a% *is#isse* petitio%erMs co#plai%t.
&sse+
:i* the 4#bu*s#a% act ;ith &rave abuse of *iscretio% i% *is#issi%& petitio%erMs co#plai%t for violatio% of $ec. 3Ee, RA 3019 a&ai%st private respo%*e%ts for *e*ucti%& ;ithhol*i%& taes o% the a#ou%t of provi*e%t fu%* be%efits petitio%er receive* over a%* above her perso%al co%tributio%=)eld+
No. he ele#e%ts of violatio% of $ec. 3 Ee of RA 3019, as a#e%*e*, are as follo;sI LE1 he accuse* is a public officer or a private perso% char&e* i% co%spiracy ;ith the for#erB LE2 he sai* public officer co##its the prohibite* acts *uri%& the perfor#a%ce of his or her official *uties or i% relatio% to his or her public positio%sBLE3 hat he or she causes u%*ue i%?ury to a%y party, ;hether the &over%#e%t or a private partyB
LE( $uch u%*ue i%?ury is cause* by &ivi%& u%;arra%te* be%efits, a*va%ta&e or prefere%ce to such partiesB a%*
LE hat the public officer has acte* ;ith #a%ifest partiality, evi*e%t ba* faith or &ross i%ecusable %e&li&e%ce.
4bviously, private respo%*e%ts *i* %ot tra%s&ress the thir* a%* fifth ele#e%ts above" #e%tio%e*. Petitio%er has %ot sho;% that she suffere* actual *a#a&e %or that private respo%*e%ts acte* ;ith evi*e%t ba* faith or &ross i%ecusable %e&li&e%ce.
Private respo%*e%ts #erely co#plie* ;ith their *uty u%*er the la;. hey ;ere &ui*e* by the prevaili%& opi%io% of the !R that provi*e%t fu%* be%efits above the e#ployeeMs perso%al co%tributio% ;ere taable, a%* he%ce, it ;as their *uty to ;ithhol* the correspo%*i%& i%co#e taes thereo%. 4% the co%trary, to &ra%t petitio%erMs re<uest for ee#ptio% for the ;ithhol*i%& ta ;oul* have sub?ecte* private respo%*e%ts to liability for #alfeasa%ce i% office, if %ot for violatio% of the a Co*e, or the A%ti" Graft a%* Corrupt Practices Act. hey coul* %ot have foresee% that the C!R ;oul* cha%&e his vie;s o% the issue at a later ti#e. he latterMs cha%&e of opi%io%, ;hile favori%& petitio%er, ;ill %ot #a'e private respo%*e%tsM act prior thereto a#ou%t to ba* faith as they relie* o% the prevaili%& le&al opi%io% o% the issue. 7e%ce, they coul* %ot be hel* cri#i%ally liable therefor.
Pa&e 10
