COMMISSIONER OF INTERNAL REVENUE vs.CEBU PORTLAND CEMENT COMPANY and COURT OF TAX APPEALSG.R. No. L-29059 December 15, 1987FACTS:By virtue of a decision of the Court of Tax Appeals rendered on June 21, 1961, as modified on appeal by the Supreme Court on February 27, 1965, the Commissioner of Internal Revenue was ordered to refund to the Cebu Portland Cement Company the amount of P359,408.98, representing overpayments of ad valorem taxes on cement produced and sold by it after October 1957.On March 28, 1968, following denial of motions for reconsideration filed by both the petitioner and the private respondent, the latter moved for a writ of execution to enforce the said judgment. The motion was opposed by the petitioner on the ground that the private respondent had an outstanding sales tax liability to which the judgment debt had already been credited. In fact, it was stressed, there was still a balance owing on the sales taxes in the amount of P 4,789,279.85 plus 28% surcharge. On April 22, 1968, the Court of Tax Appeals granted the motion, holding that the alleged sales tax liability of thep rivate respondent was still being questioned and therefore could not be set-off against the refund.ISSUE:Whether or not the judgment debt can be enforced against private respondents sales tax liability, the latter still being questioned.RULING: The argument that the assessment cannot as yet be enforced because it is still being contested loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to a halt and all government functions would be paralyzed. The Tax Code provides: Sec. 291.Injunction not available to restrain collection of tax.- No court shall have authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by this Code. It goes without saying that this injunction is available not only when the assessment is already being questioned in a court of justice but more so if, as in the instant case, the challenge to the assessment is still-and only-on the administrative level. There is all the more reason to apply the rule here because it appears that even after crediting of their fund against the tax deficiency, a balance of more than P 4 million is still due from the private respondent.

Municipality of Makati vs. Court of AppealsG.R. Nos. 89898-99 October 1, 1990

Facts: Petitioner Municipality of Makati expropriated a portion of land owned by private respondents, Admiral Finance Creditors Consortium, Inc. After proceedings, the RTC of Makati determined the cost of the said land which the petitioner must pay to the private respondents amounting to P5,291,666.00 minus the advanced payment of P338,160.00. It issued the corresponding writ of execution accompanied with a writ of garnishment of funds of the petitioner which was deposited in PNB. However, such order was opposed by petitioner through a motion for reconsideration, contending that its funds at the PNB could neither be garnished nor levied upon execution, for to do so would result in the disbursement of public funds without the proper appropriation required under the law, citing the case of Republic of the Philippines v. Palacio. The RTC dismissed such motion, which was appealed to the Court of Appeals; the latter affirmed said dismissal and petitioner now filed this petition for review.

Issue: Whether or not funds of the Municipality of Makati are exempt from garnishment and levy upon execution.

Held: It is petitioner's main contention that the orders of respondent RTC judge involved the net amount of P4,965,506.45, wherein the funds garnished by respondent sheriff are in excess of P99,743.94, which are public fund and thereby are exempted from execution without the proper appropriation required under the law. There is merit in this contention. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless otherwise provided for by statute. Municipal revenues derived from taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of financing the governmental activities and functions of the municipality, are exempt from execution. Absent a showing that the municipal council of Makati has passed an ordinance appropriating the said amount from its public funds deposited in their PNB account, no levy under execution may be validly effected. However, this court orders petitioner to pay for the said land which has been in their use already. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation of land they are already enjoying. The State's power of eminent domain should be exercised within the bounds of fair play and justice.

COMMISSIONER OF INTERNAL REVENUE vs. ALGUE and THE COURT OF TAX APPEALSG.R. No. L-28896 February 17, 1988FACTS:The Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties. For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals. The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees.

ISSUE:Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns.

RULING:The Supreme Court agrees with the respondent court that the amount of the promotional fees was not excessive. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. 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. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government.

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.

Held: Yes. BPI is entitled to 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.

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 Shippings representative made a pre-payment of the required income and common carriers 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.

Held: Yes, 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 publics trust and confidence in the Government this power must be used justly and not treacherously.

COMMISSIONER OF INTERNAL REVENUE V. MISTUBISHI METAL CORPORATION (181 SCRA 214)

Facts: Atlas Consolidated Mining and Development Corporation, a domestic corporation, entered into a Loan and Sales Contract with Mitsubishi Metal Corporation, a Japanese corporation licensed to engage in business in the Philippines. To be able to extend the loan to Atlas, Mitsubishi entered into another loan agreement with Export-Import Bank (Eximbank), a financing institution owned, controlled, and financed by the Japanese government. After making interest payments to Mitsubishi, with the corresponding 15% tax thereon remitted to the Government of the Philippines, Altas claimed for tax credit with the Commissioner of Internal Revenue based on Section 29(b)(7) (A) of the National Internal Revenue Code, stating that since Eximbank, and not Mitsubishi, is where the money for the loan originated from Eximbank, then it should be exempt from paying taxes on its loan thereon.

Issue: WON the interest income from the loans extended to Atlas by Mitsubishi is excludible from gross income taxation.

Held: NO. Mitsubishi secured the loan from Eximbank in its own independent capacity as a private entity and not as a conduit of Eximbank. Therefore, what the subject of the 15% withholding tax is not the interest income paid by Mitsubishi to Eximbank, but the interest income earned by Mitsubishi from the loan to Atlas. Thus, it does not come within the ambit of Section 29(b)(7)(A), and it is not exempt from the payment of taxes.Notes: Findings of fact of the Court of Tax Appeals are entitled to the highest respect and can only be disturbed on appeal if they are not supported by substantial evidence or if there is a showing of gross error or abuse on the part of the tax court. Laws granting exemption from tax are construed strictissimi juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is the exception.

Phil Bank of Communications vs. CIR, et. al.302 SCRA 241 January 28, 1999FACTS: Petitioner PBCom filed its first and second quarter income tax returns, reported profits, and paid income taxes amounting to P5.2M in 1985. However, at the end of the year PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended December 31, 1986, the petitioner likewise reported a net loss of P14.1 M, and thus declared no tax payable for the year. In 1988, the bank requested from CIR for a tax credit and tax refunds representing overpayment of taxes. Pending investigation of the respondent CIR, petitioner instituted a Petition for Review before the Court of Tax Appeals (CTA). CTA denied its petition for tax credit and refund for failing to file within the prescriptive period to which the petitioner belies arguing the Revenue Circular No.7-85 issued by the CIR itself states that claim for overpaid taxes are not covered by the two-year prescriptive period mandated under the Tax Code.

ISSUE: Is the contention of the petitioner correct? Is the revenue circular a valid exemption to the NIRC?

HELD: No. The relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law. 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.

Sison vs Ancheta

Facts: Batas Pambansa 135 was enacted. Sison, as taxpayer, alleged that its provision (Section 1) unduly discriminated against him by the imposition of higher rates upon his income as a professional, that it amounts to class legislation, and that it transgresses against the equal protection and due process clauses of the Constitution as well as the rule requiring uniformity in taxation.

Issue: Whether BP 135 violates the due process and equal protection clauses, and the rule on uniformity in taxation.

Held: There is a need for proof of such persuasive character as would lead to a conclusion that there was a violation of the due process and equal protection clauses. Absent such showing, the presumption of validity must prevail. Equality and uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. Where the differentiation conforms to the practical dictates of justice and equity, similar to the standards of equal protection, it is not discriminatory within the meaning of the clause and is therefore uniform. Taxpayers may be classified into different categories, such as recipients of compensation income as against professionals. Recipients of compensation income are not entitled to make deductions for income tax purposes as there is no practically no overhead expense, while professionals and businessmen have no uniform costs or expenses necessary to produce their income. There is ample justification to adopt the gross system of income taxation to compensation income, while continuing the system of net income taxation as regards professional and business income.

REYES v. ALMANZORGR Nos. L-49839-46, April 26, 1991196 SCRA 322

FACTS: Petitioners JBL Reyes et al. owned a parcel of land in Tondo which are leased and occupied as dwelling units by tenants who were paying monthly rentals of not exceeding P300. Sometimes in 1971 the Rental Freezing Law was passed prohibiting for one year from its effectivity, an increase in monthly rentals of dwelling units where rentals do not exceed three hundred pesos (P300.00), so that the Reyeses were precluded from raising the rents and from ejecting the tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of the subject properties based on the schedule of market values, which entailed an increase in the corresponding tax rates prompting petitioners to file a Memorandum of Disagreement averring that the reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional" considering that the taxes imposed upon them greatly exceeded the annual income derived from their properties. They argued that the income approach should have been used in determining the land values instead of the comparable sales approach which the City Assessor adopted.

ISSUE: Is the approach on tax assessment used by the City Assessor reasonable?

HELD: No. The taxing power has the authority to make a reasonable and natural classification for purposes of taxation but the government's act must not be prompted by a spirit of hostility, or at the very least discrimination that finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different both in the privileges conferred and the liabilities imposed.Consequently, it stands to reason that petitioners who are burdened by the government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social justice should not now be penalized by the same government by the imposition of excessive taxes petitioners can ill afford and eventually result in the forfeiture of their properties.

PAL v. Sec of FinanceGR No. 115852; 30 October 1995

FACTS: The Value-Added Tax [VAT] is levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the existing VAT system and enhance its administration by amending the National Internal Revenue Code.These are various suits for certiorari and prohibition challenging the constitutionality of RA 7716:In the case at bar, PAL attacks the formal validity of Republic Act No. 7716. PAL contends that it violates Art. VI, Section 26[1] which provides that "Every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof." It is contended that neither H. No. 11197 nor S. No. 1630 provided for removal of exemption of PAL transactions from the payment of the VAT and that this was made only in the Conference Committee bill which became Republic Act No. 7716 without reflecting this fact in its title.The title of Republic Act No. 7716 is:AN ACT RESTRUCTURING THE VALUE-ADDED TAX [VAT] SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.Furthermore, section 103 of RA 7716 states the following:Section 103. Exempt Transactions.- The following shall be exempt from the value-added tax:[q] Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, 1590.The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is concerned.Philippine Airlines [PAL] claims that its franchise under P.D. No. 1590 which makes it liable for a franchise tax of only 2% of gross revenues "in lieu of all the other fees and charges of any kind, nature or description, imposed, levied, established, assessed or collected by any municipal, city, provincial, or national authority or government agency, now or in the future," cannot be amended by Rep. Act No. 7716 as to make it [PAL] liable for a 10% value-added tax on revenues, because Sec. 24 of P.D. No. 1590 provides that PAL's franchise can only be amended, modified or repealed by a special law specifically for that purpose.

ISSUE: Whether or not this amendment of Section 103 of the NIRC is fairly embraced in the title of Republic Act No. 7716, although no mention is made therein of P. D. No. 1590

HELD: The court ruled in in the affirmative. The title states that the purpose of the statute is to expand the VAT system, and one way of doing this is to widen its base by withdrawing some of the exemptions granted before. To insist that P. D. No. 1590 be mentioned in the title of the law, in addition to Section 103 of the NIRC, in which it is specifically referred to, would be to insist that the title of a bill should be a complete index of its content.The constitutional requirement that every bill passed by Congress shall embrace only one subject which shall be expressed in its title is intended to prevent surprise upon the members of Congress and to inform the people of pending legislation so that, if they wish to, they can be heard regarding it. If, in the case at bar, petitioner did not know before that its exemption had been withdrawn, it is not because of any defect in the title but perhaps for the same reason other statutes, although published, pass unnoticed until some event somehow calls attention to their existence.Republic Act No. 7716 expressly amends PAL's franchise [P. D. No. 1590] by specifically excepting from the grant of exemptions from the VAT PAL's exemption under P. D. No. 1590. This is within the power of Congress to do under Art. XII, Section 11 of the Constitution, which provides that the grant of a franchise for the operation of a public utility is subject to amendment, alteration or repeal by Congress when the common good so requires.