7/29/2019 5. Summary of Significant SC Cases (August- October 2009)

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SUMMARY OF SIGNIFICANT SUPREME COURT CASES (AUGUST- OCTOBER 2009)

By: Atty. Dianna Lynne Sin Baysac

1. Prohibited Double Taxation

Section 21 of the Manila Tax Ordinance No. 7794 exempts from payment of local business taximposed by said section businesses already paying such tax under other sections of the sameordinance like the taxpayer subject to business tax under Section 14. The said proviso, however, wasdeleted by Tax Ordinance No. 7988 and No. 8011. Said exempting proviso was precisely included insaid section to avoid double taxation as prohibited under Section 143 (h) of the Local GovernmentCode (LGC). Tax Ordinance No. 7988 and No. 8011 are, therefore, hereby declared null and voidand without legal effect. The City of Manila, et al., v. Coca-Cola Bottlers Philippines, G.R.181845, August 12, 2009.

2. Section 111 (A) of the new NIRC providing for transitional input tax credits to taxpayersnot previously covered under the VAT law is clear and unambiguous to cover goods andproperties.

Section 100 (now 105) defines good or properties to include real properties held primarily forsale to costumers or held for lease in the ordinary course of business. The statutory definitionleaves no room for doubt. Thus, having been defined, the term goods as used in Section 105 (now111(A)) of the same Code could not have a different meaning. xxx As mandated by Article 7 of theCivil Code, an administrative rule or regulation, to be valid, must conform and not contravene thelaw on which it is based. It cannot modify, expand, or subtract from the law it is intended to

implement. Any rule that is not consistent with the statute itself is null and void. Whileadministrative agencies, such as the Bureau of Internal Revenue, may issue regulations to implementstatutes, they are without authority to limit the scope of the statute to less than what it provides, orextend or expand the statute beyond its terms, or in any way modify explicit provisions of the law.Indeed, a quasi-judicial body or an administrative agency for that matter cannot amend an act ofCongress. Hence, in case of a discrepancy between the basic law and an interpretative oradministrative ruling, the basic law prevails.

Section 4.105-1 of RR 7-95, which limits goods to improvements on the real property whileexcludes the real properties themselves is, therefore, struck down for being contradictory to the TaxCode. Fort Bonifacio Development Corp. v. Commissioner of Internal Revenue, G.R. 158885

and 170680. October 2, 2009.

3. Special savings deposit (SSD) accounts which have the same features as a time depositaccount, i.e., a fixed term in order to earn a higher interest rate, is subject to theDocumentary Stamp Tax (DST) imposed under Section 180 (now 179) of the 1997 NationalInternal Revenue Code.

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Petitioners claim that their Savings Plus Deposit is a regular savings account since it is evidenced bya passbook, hence, not subject to DST is untenable. A deposit account which has the same featuresas a time deposit account, i.e., a fixed term in order to earn a higher interest rate, is subject to theDocumentary Stamp Tax imposed under Section 180 of the 1997 National Internal Revenue Code.A passbook representing an interest-earning deposit account issued by a bank qualifies as a

certificate of deposit drawing interest. A document to be deemed a certificate of deposit requires nospecific form as long as there is some written memorandum that the bank accepted a deposit of asum of money from a depositor. What is important and controlling is the nature or meaningconveyed by the passbook and not the particular label or nomenclature attached to it, inasmuch assubstance, not form, is paramount. Hence, whether or not SSDs are subject to documentary stamptax is dependent on the nature and specific features thereof. It is thus conceded that if the SSDs aremore akin to a time deposit account then the same would be subject to documentary stamp tax.However, if the SSDs are more akin to a regular savings deposit account then the same would notbe subject to documentary stamp tax. China Banking Corporation v. Commissioner of InternalRevenue, G.R. 172359. October 2, 2009.

4. The certificate of sale issues only upon approval of the executive judge who must, in theinterest of fairness, first determine that the requirements for extrajudicial foreclosure havebeen strictly followed. Hence, the reckoning period of the redemption period, and thereforethe collection of taxes, commences only from this period.

The position of the CIR that the redemption period should be reckoned from the date of theauction sale for, otherwise, the taxing authority would be left at the mercy of the executive judgewho may unnecessarily delay the approval of the certificate of sale and thus prevent the earlypayment of taxes, is untenable.

Besides, on August 15, 2008, the Bureau of Internal Revenue issued Revenue Memorandum Circular

58-2008 clarifying among others, the time within which to reckon the redemption period of realestate mortgages reads: For purposes of reckoning the one-year redemption period in the case ofindividual mortgagors, or the three-month redemption period for juridical persons/mortgagors, thesame shall be reckoned from the date of the confirmation of the auction sale which is the date whenthe certificate of sale is issued. Commissioner of Internal Revenue v. United Coconut PlantersBank, G.R. 179063. October 23, 2009.