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G.R. No.

L-43082 June 18, 1937


LORENZO vs. POSADAS JR.

FACTS:
Thomas Hanley died, leaving a will and a considerable amount of real and personal properties. Proceedings for the probate of his will and
the settlement and distribution of his estate were filed before the CFI of Zamboanga. Following the provisions of the will, the CFI appointed
a trustee to administer the real properties which, under the will, were to pass to nephew Matthew ten years after the two executors named
in the will was appointed trustee. Moore acted as trustee until he resigned and the plaintiff Lorenzo herein was appointed in his stead.

During the incumbency of plaintiff Lorenzo, the Collector of Internal Revenue (Posadas) assessed against the estate an inheri tance tax,
together with the penalties for deliquency in payment. Lorenzo paid said amount under protest. Posadas overruled Lorenzos protest and
refused to refund the said amount. When brought before the CFI, it dismissed the plaintiffs complaint. Hence, this appeal.

ISSUE:
WON, there was delinquency in the payment of the inheritance tax?

HELD:
YES! Whatever may be the time when actual transmission of the inheritance takes place, succession takes place in any event at the
moment of the decedents death. The time when the heirs legally succeed to the inheritance may differ from the time when the heirs
actually receive such inheritance. Thomas Hanley having died on May 27, 1922, the inheritance tax accrued as of the date. From the fact,
however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay the tax arose as of the date. The accrual
of the inheritance tax is distinct from the obligation to pay the same. The time for the payment on inheritance tax is clearl y fixed by section
1544 of the Revised Administrative Code as amended by Act No. 3031 which provides:

SEC. 1544. When tax to be paid. The tax fixed in this article shall be paid:
(a) In the second and third cases of the next preceding section, before entrance into possession of the property.
(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial testamentary or intestate
proceedings shall be instituted prior to the expiration of said period, the payment shall be made by the executor or administ rator before
delivering to each beneficiary his share.

The instant case falls under subsection b, of section 1544 above-quoted; under the subsection, the tax should have been paid before the
delivery of the properties in question to Moore as trustee.

NOTES:
(a) Should inheritance tax be computed on the basis of the value of the estate at the time of the testators death, or on its value ten years later?
Answer: If death is the generating source from which the power of the estate to impose inheritance taxes takes its being and if, upon the death of the
decedent, succession takes place and the right of the estate to tax vests instantly, the tax should be measured by the value of the estate as it stood at the
time of the decedents death, regardless of any subsequent contingency value of any subsequent increase or decrease in value

(b) In determining the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees?
Answer: NO! A trustee, no doubt, is entitled to receive a fair compensation for his services. But from this it does not follow that the compensation due him
may lawfully be deducted in arriving at the net value of the estate subject to tax. There is no statute in the Philippines which requires trustees commissions
to be deducted in determining the net value of the estate subject to inheritance tax

(c) SEC. 1543. Exemption of certain acquisitions and transmissions. The following shall not be taxed:
(a) The merger of the usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the trustees.
(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the desire of the predecessor.

(d) To constitute a valid testamentary trust there must be a concurrence of three circumstances: (1) Sufficient words to raise a trust; (2) a definite subj ect;
and (3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect so providing.
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G.R. No. L-10128. November 13, 1956
Mamerto C. Corre vs. Guadalupe Tan Corre

FACTS:
Plaintiff brought an action before the CFI Manila seeking his legal separation from Defendant, his wife, and the placing of their minor
children under the care and custody of a reputable womens dormitory or institution as the court may recommend. Defendant moved to
dismiss the complaint on the ground that the venue is improperly laid. She claims that since it appears in the complaint that neither the
Plaintiff nor the Defendant is a resident of the City of Manila the court where the action was filed is not the proper court to take cognizance
of the case.

The CFI upheld the contention of Defendant and, accordingly, dismissed the case. Hence, Plaintiff appealed. The portion of the complaint
reads: 1. That Plaintiff is an American citizen, resides in Las Vegas and for the purpose of filing and maintaining this suit, temporarily
resides in Santa Mesa, Manila; 2. That Defendant is a Filipino, 40 years of age and resident of the province of Samar, where summons
may be served;



ISSUE:
WON, Sta Mesa Manila, plaintiffs temporary residence, may serve as the basis for the purpose of determining the proper venue.

HELD:
NO! Section 1, Rule 5, of the Rules of Court provides that Civil actions in Courts of First Instance maybe commenced and tried where the
Defendant or any of the Defendants resides or may be found, or where the Plaintiff or any of the Plaintiffs resides, at the election of the
Plaintiff. From this rule it may be inferred that Plaintiff can elect to file the action in the court he may choose if both the Plaintiff and the
Defendant have their residence in the Philippines. Otherwise, the action can only be brought in the place where either one resides.

It the present case, it clearly appears in the complaint that the Plaintiff is a resident of Las Vegas,Nevada, U. S. A. while the Defendant is a
resident of the municipality of Catbalogan, province of Samar. Such being the case, Plaintiff has no choice other than to file the action in
the court of firstinstance of the latter province. The allegation that the Plaintiff for the purpose of filing and maintaining this suit, temporarily
resides in Santa Mesa, Manila cannot serve as basis for the purpose of determining the venue for that is not the residence contemplated
by the rule. If that were allowed, it would create a situation where a person may have his residence in one province and, to suit his
convenience, or to harass the Defendant, may bring the action in the court of any other province. Indeed, residence as used in said rule is
synonymous with domicile. This is define as the permanent home, the place to which, whenever absent for business or pleasure, one
intends to return, and depends on facts and circumstances, in the sense that they disclose intent.
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G.R. No. L-11622 January 28, 1961
CIR, petitioner, vs. DOUGLAS FISHER AND BETTINA FISHER, and COURT OF TAX APPEALS, respondents
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G.R. No. L-11668 January 28, 1961
DOUGLAS FISHER AND BETTINA FISHER, petitioner, vs. CIR and CTA, respondents

FACTS:
Walter G. Stevenson was born in the Philippines of British parents and got married in Manila to another British subject, Beat rice. He died in
1951 in California where he and his wife moved to. In his will, he instituted Beatrice as his sole heiress to certain real and personal
properties, among which are 210,000 shares of stocks in Mindanao Mother Lode Mines (Mines). Ian Murray Statt (Statt), the appointed
ancillary administrator of his estate filed an estate and inheritance tax return before the CIR. Subsequently, Statt filed an amended estate
and inheritance tax return claiming additional exemptions with regards the estate and inheritance tax on the Mines shares of stock
pursuant to a reciprocity proviso in the NIRC, hence, warranting a refund from what he initially paid. The collector denied the claim. He then
filed in the CFI of Manila for the said amount. CFI ruled that (a) the share of Beatrice should be deducted from the net estate of Walter,
(b) the Mines shares of stock is exempt from inheritance tax pursuant to the reciprocity proviso in the NIRC.

ISSUES:
WON, the estate can avail itself of the reciprocity proviso granting exemption from the payment of estate taxes on the Mines shares of
stock.

HELD:
NO! Reciprocity must be total. If any of the two states collects or imposes or does not exempt any transfer, death, legacy or succession tax
of any character, the reciprocity does not work. In the Philippines, upon the death of any citizen or resident, or non-resident with properties,
there are imposed upon his estate, both an estate and an inheritance tax. But, under the laws of California, only inheritance tax is imposed.
Also, although the Federal Internal Revenue Code imposes an estate tax, it does not grant exemption on the basis of reciprocity. Thus, a
Filipino citizen shall always be at a disadvantage. This is not what the legislators intended. Hence, the intangible personal property is not
exempt from inheritance tax, there being no complete total reciprocity as required in section 122 of the National Internal Revenue Code.
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G.R. No. L-17618 August 31, 1964
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. NORTON and HARRISON COMPANY, respondent

FACTS:
Norton and Harrison is a corporation organized to buy and sell all kinds of goods, wares and merchandise, to acts as agents of
manufacturers in the US and to carry on and conduct wholesale and retail mercantile establishments in the Philippines. Jackbi lt is a
coporation engaged in the making, producing and manufacturing concrete blocks. Norton and Jackbilt entered into an agreement whereby
Norton was made the sole and exclusive distributor of concrete blocks manufactured by Jackbilt. During the existence of the distribution or
agency agreement, Norton acquired by purchase all the outstanding stock of Jackbilt. Due to this transaction, the CIR assessed
respondent Norton for deficiency sales tax and surcharges and considered the sale of Norton to the public as the original sale and not the
transaction of Jackbilt. The Tax Court relieved Norton of tax liability. Hence, this appeal by the Commissioner.

ISSUE:
WON, the acquisition of all the stocks of Jackbilt by the Norton and Harison Co., merged the two corporations into a single corporation,
thereby making Norton liable for payment of sales tax.

HELD:
YES! It has been settled that the ownership of all the stocks of a corporation by another corporation does not necessarily breed an identity
of corporate interest between the two companies. However, in the case at bar, there are sufficient grounds to support that the separate


identities of the two companies should be disregarded, to wit: Norton owned all the shares of Jackbilt; Norton constituted Jackbilts board of
directors; Norton financed the operations of Jackbilt; Norton treats Jackbilt employees as its own. Compensation given to board members
of Jackbilt, indicate that Jackbilt is merely a department of Norton. The circumstances presented by the facts of the case, yields to the
conclusion that the Jackbilt is merely adjunct, business conduit or alter ego, of Norton and Harrison, and that the fiction of corporate
entities, separate and distinct from each other should be disregarded. To allow a taxpayer to deny tax liability on the ground that the sales
were made through another and distinct corporation when it is proved that the latter is virtually owned by the former or that they are
practically one and the same is to sanction a circumvention of our tax laws. Accordingly, Norton and Harrison is declared liable for the
deficiency sales taxes assessed against it by the appellant CIR, plus 25% surcharge thereon.
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G.R. L-13250 October 29, 1971
Collector of Internal Revenue vs. Antonio Campos Rueda

FACTS:
In January 1955, Maria Cerdeira died in Tangier, Morocco (an international zone [foreign country] in North Africa). At the time of her death,
she was a Spanish citizen and was a resident of Tangier. She however left some personal properties (shares of stocks and other
intangibles) in the Philippines. The designated administrator of her estate here is Antonio Campos Rueda. In the same year, the Collector
of Internal Revenue (CIR) assessed the estate for deficiency taxes. Campos Rueda refused to pay the assessed tax claiming that the
estate is exempt from the payment of said taxes pursuant to section 122 of the Tax Code which provides:

That no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent at the time of his death
was a resident of a foreign country which at the time of his death did not impose a transfer tax or death tax of any character in
respect of intangible person property of the Philippines not residing in that foreign country, or (b) if the laws of the foreign country
of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every
character in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.

Campos Rueda was able to prove that there is reciprocity between Tangier and the Philippines. However, the CIR still denied any tax
exemption in favor of the estate as it averred that Tangier is not a state as contemplated by Section 22 of the Tax Code and that the
Philippines does not recognize Tangier as a foreign country.

ISSUE:
WON, Tangier is a state for purposes of taxation which merit proper application of the doctrine of reciprocity.

HELD:
YES! A foreign country to be identified as a state must be a politically organized sovereign community independent of outside control
bound by penalties of nationhood, legally supreme within its territory, acting through a government functioning under a regime of law. The
stress is on its being a nation, its people occupying a definite territory, politically organized, exercising by means of its government its
sovereign will over the individuals within it and maintaining its separate international personality. Further, prior jurisprudence also shows
that even a tiny principality, like that of Liechtenstein, hardly an international personality in the sense, did fall under the exempt category
provided for in Section 22 of the Tax Code. Hence, since it was proven that Tangier provides such exemption to personal properties of
Filipinos found therein so must the Philippines honor the exemption as provided for by our tax law with respect to the doctrine of reciprocity.
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G.R. No. 140944; April 30, 2008
Rafael Arsenio S. Dizon, vs. CTA and CIR

FACTS:
Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of his will was filed. The probate court appointed Atty.
Rafael Arsenio P. Dizon as administrator of the formers estate. An estate tax return was filed later on which showed zero estate tax
liability. BIR thereafter issued a deficiency estate tax assessment, demanding payment of deficiency estate tax. The CA affirmed the
CTAs ruling, hence, the instant petition. Petitioner claims that in as much as the valid claims of creditors against the estate are in excess of
the gross estate, no estate tax was due. On the other hand, respondents argue that since the claims of the estates creditors have been
condoned, such claims may no longer be deducted from the gross estate of the decedent.

ISSUE:
WON, the actual claims of creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the sai d claims
were through compromise agreements entered into by the Estate with its creditors.

HELD:
YES! This is because estate tax is a tax imposed on the act of transferring property by will or intestacy and, because the act on which the
tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the property transferred should be ascertained, as nearly
as possible, as of the that time. This is the date-of-death valuation rule.

The Court, in adopting the date-of-death valuation principle, explained that: First. There is no law, nor do we discern any legislative intent
in our tax laws, which disregards the date-of-death valuation principle and particularly provides that post-death developments must be
considered in determining the net value of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be
imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the
government. Second. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein the term "claims"


required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature whi ch could
have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death. Therefore, the claims
existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.
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14 SCRA 292
LLadoc v. CIR

FACTS:
Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated 10,000.00 pesos in cash to Fr. Crispin Ruiz, the parish priest of Victorias,
Negros Occidental, and predecessor of Fr. Lladoc, for the construction of a new Catholic church in the locality. The donated amount was
spent for such purpose. On April 29, 1960, the Commissioner of Internal Revenue issued an assessment for the donee's gift tax against the
Catholic Parish of Victorias of which petitioner was the parish priest.

ISSUE:
Whether the imposition of gift tax is valid despite the fact that the Constitution provides an exemption and that Fr. Lladoc was not the Parish
priest at the time of donation.

HELD:
YES! The imposition of the gift tax was valid. Section 22(3) Article VI of the Constitution contemplates exemption only from payment of
taxes assessed on such properties as Property taxes contra distinguished from Excise taxes. The imposition of the gift tax on the property
used for religious purpose is not a violation of the Constitution. A gift tax is not a property by way of gift inter vivos, the imposition of which
on property used exclusively for religious purposes, does not constitute an impairment of the Constitution. As well observed by the learned
respondent Court, the phrase "exempt from taxation," as employed in the Constitution should not be interpreted to mean exemption from all
kinds of taxes. There being no clear, positive or express grant of such privilege by law the exemption herein must be denied.
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GR No. L-19865 July 31, 1965
Pirovano v. CIR

FACTS:
De la Rama Steamship Co. insured the life of Enrico Pirovano who was then its President and General Manager. The company initially
designated itself as the beneficiary of the policies but, after Pirovanos death, it renounced all its rights, title and interest therein, in favor of
Pirovanos heirs. The CIR subjected the donation to gift tax. Pirovanos heirs contended that the grant was not subject to such donees tax
because it was not a simple donation but was instead remuneratory, as it was made for a full and adequate compensation for the valuable
services by the late Priovano.

ISSUE:
WON, the donation is remuneratory and therefore not subject to donees tax, but rather taxable as part of gross income.

HELD:
No, the donation is not remuneratory. There is nothing on record to show that when the late Enrico Pirovano rendered services as
President and General Manager of the De la Rama Steamship Co. and was largely responsible for the rapid and very successful
development of the activities of the company", he was not fully compensated for such services. The fact that his services contributed in a
large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his
heirs remain a gift or a donation. The companys gratitude was the true consideration for the donation, and not the services themselves.
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97 Phils 889
TANG HO vs. BOARD OF TAX APPEALS

FACTS:
Li Seng Giap and his wife Tang Ho and their thirteen children appear to be stockholders of two close family corporations named Li Seng
Giap & Sons, Inc. and Li Seng Giap & Co. Examiners of the Bureau of Internal Revenue made an examination of the books of the two
corporations and found that each of Li Seng Giap's 13 children had a total investment therein of approximately P63,195.00, in shares
issued to them by their father in the years 1940, 1942, 1948, 1949, and 1950. The Collector of Internal Revenue regarded these transfers
as undeclared gifts made in the respective years, and assessed against Li Seng Giap and his children donor's and donee's. Appellants
contend that as the cash donated came from the conjugal funds, they constituted individual donations by each of the spouses Li Seng Giap
and Tang Ho of one half of the amount received by the donees in each instance. They claimed the benefit of gift tax exemptions (under
section 110 and 112 of the Internal Revenue Code) at the rate of P2000 a year for each donation, plus P10,000 for each gift propter
nuptias made by either parent. The Collector refused the request of appellants to revise his original assessments. On appeal, the Board of
Tax Appeals upheld the decision of the respondent Collector of Internal Revenue; hence, this petition for review.

ISSUE:
Whether the donations made by petitioner Li Seng Giap to his children from the conjugal property are taxable against husband and wife,
and therefore, exemptions may be claimed twice.

HELD:


NO. The law clearly differentiates the donations made "by the husband" from the "donations by both spouses by common consent". Under
Articles 1409 and 1415, the lawful donations by the husband to the common children are valid and are chargeable to the community
property, irrespective of whether the wife agrees or objects thereof. Obviously, should the wife object to the donation, she cannot be
regarded as a donor at all. Appellants herein are therefore in error when they contend that it is enough that the property donated should
belong to the conjugal partnership in order that the donation be considered and taxed as a donation of both husband and wife, even if the
husband should appear as the sole donor. There is no blinking the fact that, under the old Civil Code, to be a donation by both spouses,
taxable to both, the wife must expressly join the husband in making the gift; her participation therein cannot be implied.-The consequence
of the husband's legal power to donate community.
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452 SCRA 162
Abello vs. CIR, CA

FACTS:
During the 1987 national elections, petitioners, who are partners in the Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm,
contributed money each to the campaign funds of Senator Edgardo Angara, then running for the Senate. BIR assessed donors tax on
each of the petitioners for their contributions. Petitioners questioned the assessment of the BIR, claiming that political or electoral
contributions are not considered gifts under the NIRC so they are not liable for donors tax. The claim for exemption was denied by the
Commissioner. The CTA ruled in favor of the petitioners, but such ruling was overturned by the CA, thus this petition for review.

ISSUE:
WON, electoral contributions are subject to donors tax.

HELD:
YES. The NIRC does not define transfer of property by gift. However, under Article 725 of the Civil Code, donation is defined as an act of
liberality whereby a person disposes gratuitously of a thing or right in favor of another, who accepts it. Donation has the following elements:
(a) the reduction of the patrimony of the donor; (b) the increase in the patrimony of the donee; and, (c) the intent to do an act of liberality or
animus donandi. All the three elements of a donation are present in the case at bar: (1) reduction in the patrimony of the four petitioners,
(2) increase in Senator Angaras patrimony and (3) intent to do an act of liberality or animus donandi was present since each of the
petitioners gave their contributions without any consideration. Petitioners argument that the intention of the giver is important to determine
if a political contribution is a gift is untenable. Donative intent is presumed present when one gives a part of ones patrimony to another
without consideration. Donative intent is not negated when the person donating has other intentions, motives or purposes. The fact that
petitioners will somehow in the future benefit from the election of the candidate to whom they contribute, in no way amounts to a valuable
material consideration. Senator Angara was under no obligation to benefit the petitioners. The proper performance of his duties as a
legislator is his obligation as an elected public servant of the Filipino people and not a consideration for the political contributions he
received. This Court is not convinced that since the purpose of the contribution was to help elect a candidate, there was no donative intent.
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GR L-81311 30 June 1988
Kapatiran ng mga Naglilingkod sa Pamahalaan vs. Tan

FACTS:
EO 273 was issued by the President of the Philippines which amended the Revenue Code, adopting the value-added tax (VAT) effective 1
January 1988. Four petitions assailed the validity of the VAT Law for being beyond the President to enact; for being oppressive,
discriminatory, regressive, and violative of the due process and equal protection clauses of the Constitution. The Integrated Customs
Brokers Association particularly contend that it unduly discriminate against customs brokers (Section 103 [r]) as the amended provision of
the Tax Code provides that service performed in the exercise of profession or calling (except custom brokers) subject to occupational tax
under the Local Tax Code, and professional services performed by registered general professional partnerships are exempt from VAT.

ISSUE:
Whether, the E-VAT law discriminates against customs brokers.

HELD:
The phrase except custom brokers is not meant to discriminate against custom brokers but to avert a potential conflict between Sections
102 and 103 of the Tax Code, as amended. The distinction of the customs brokers from the other professionals who are subject to
occupation tax under the Local Tax Code is based upon material differences, in that the activities of customs brokers partake more of a
business, rather than a profession and were thus subjected to the percentage tax under Section 174 of the Tax Code prior to i ts
amendment by EO 273. EO 273 abolished the percentage tax and replaced it with the VAT. If the Association did not protest the
classification of customs brokers then, there is no reason why it should protest now.
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G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST, Petitioners, vs. EXECUTIVE SECRETARY EDUARDO ERMITA et al., Respondent

FACTS:
Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in common that Sections 4, 5 and 6 of R.A.
No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate
from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax. Petitioners also argue that


RA No. 9337 is unconstitutional for being: (1) a violation to the equal protection clause which provides for uniformity; (2) regressive kind of
taxes violating the constitutional provision on progressive system of taxation.

ISSUES:
WON, R.A. No. 9337 is constitutional.

HELD:
YES! The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which
enforcement and administration of the increase rate under the law is contingent. It leaves the entire operation or non-operation of the 12%
rate upon factual matters outside of the control of the executive. Thus, it is the ministerial duty of the President to immediately impose the
12% rate upon the existence of any of the conditions specified by Congress. In this case, the tax law is uniform as it provides a standard
rate of 0% or 10% (or 12%) on all goods and services. Neither does the law make any distinction as to the type of industry or trade that will
bear the 70% limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital goods or the 5% final
withholding tax by the government. R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or
10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1,500,000.00. Also, basic
marine and agricultural food products in their original state are still not subject to the tax, thus ensuring that prices at the grassroots level
will remain accessible. Although, the VAT is a regressive kind of taxation; nevertheless, the Constitution does not really prohibit the
imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall "evolve a progressive system of taxation." Resort to
indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible.


For notes only, no need to write:
1. Input Tax vs. Output Tax vs. VAT Payable
Ans. Input tax is the tax paid by a person, passed on to him by the seller, when he buys goods. Output tax, meanwhile, is the tax due to the person when he
sells goods. In computing the VAT payable, three possible scenarios may arise:
First, if at the end of a taxable quarter the output taxes charged by the seller are equal to the input taxes that he paid and passed on by the
suppliers, then no payment is required;
Second, when the output taxes exceed the input taxes, the person shall be liable for the excess, which has to be paid to the Bureau of Internal
Revenue (BIR); and
Third, if the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the input taxes
result from zero-rated or effectively zero-rated transactions, any excess over the output taxes shall instead be refunded to the taxpayer or credited
against other internal revenue taxes, at the taxpayers option.
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a person can credit his input tax only up to the extent of
70% of the output tax. In laymans term, the value-added taxes that a person/taxpayer paid and passed on to him by a seller can only be credited
up to 70% of the value-added taxes that is due to him on a taxable transaction.
2. WON, input tax maybe considered a property that may not be confiscated, appropriated, or limited without due process of law.
Ans. Input tax is not a property or a property right within the constitutional purview of the due process clause. A VAT-registered persons entitlement to the
creditable input tax is a mere statutory privilege. The state may change or take away rights, which were created by the law of the state, although it may
not take away property, which was vested by virtue of such rights.

3. The VAT is an indirect tax on spending or consumption levied on the sale, barter, exchange or lease of goods or services. Being an indirect tax, the
seller may pass on the tax to the buyer, with the seller acting merely as a tax collector. In contrast, a direct tax is a tax for which a taxpayer is directly
liable on the transaction or business it engages in, without transferring the burden to someone else.
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G.R. No. 149073. February 16, 2005
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CEBU TOYO CORPORATION, respondent

FACTS:
Respondent Cebu Toyo Corporation is a domestic corporation engaged in the manufacture of lenses and various optical component s used
in television sets, cameras, compact discs and other similar devices with principal office in MEPZ, Lapu-Lapu City, Cebu. Respondent is a
zone export enterprise registered with the Philippine Economic Zone Authority (PEZA) and also registered with the Bureau of Internal
Revenue (BIR) as a VAT taxpayer.

As an export enterprise, respondent sells 80% of its products to its mother corporation, the Japan-based Toyo Lens Corporation. The rest
are sold to various enterprises doing business in the MEPZ. Inasmuch as both sales are considered export sales subject to Value-Added
Tax (VAT) at 0% rate, respondent filed an application for tax credit/refund of VAT paid representing excess VAT input payment s. Without
waiting for the resolution of its claim by the CIR, the petitioner filed a petition before the CTA alleging that as a VAT-registered exporter of
goods, it is subject to VAT at the rate of 0% on its export sales. Hence, the unutilized VAT input taxes on its purchases of goods and
services related to such zero-rated activities are available as tax credits or refunds.

ISSUE:
WON, Cebu Toyo Corporation is subject to 10% or zero (0%) rate of VAT.

HELD:


ZERO RATED! In this case, it is undisputed that respondent is engaged in the export business and is registered as a VAT taxpayer per
Certificate of Registration of the BIR. Further, the records show that the respondent is subject to VAT as it availed of the income tax holiday
under E.O. No. 226 which thus, exempts it from income taxes for a number of years but not from other internal revenue taxes such as VAT.
In fine, it is engaged in taxable rather than exempt transactions. Perforce, respondent is subject to VAT at 0% rate and is entitled to a
refund or credit of the unutilized input taxes.

For notes only, no need to write:
1. Rules on VAT
GR: Sale of goods and supply of services performed in the Philippines are taxable at the rate of 10% (now 12%)
Exception:
(a) Exempt Transactions not subject to VAT output tax but cannot claim input tax credit
(b) Export sales or sales outside the Philippines - subject to value-added tax at 0% if made by a VAT-registered person and shall not result in
any output tax. However, the input tax on his purchase of goods, properties or services related to such zero-rated sale shall be available as
tax credit or refund.

2. Zero Rated vs. Exempt, Results to the same output tax but differ in several aspects, to wit:
(a) A zero-rated sale is a taxable transaction but does not result in an output tax while an exempted transaction is not subject to the output tax;
(b) The input VAT on the purchases of a VAT-registered person with zero-rated sales may be allowed as tax credits or refunded while the seller in
an exempt transaction is not entitled to any input tax on his purchases despite the issuance of a VAT invoice or receipt.
(c) Persons engaged in transactions which are zero-rated, being subject to VAT, are required to register while registration is optional for VAT-
exempt persons.

3. Taxable vs. Exempt Transactions
(a) Taxable transactions are those transactions which are subject to value-added tax either at the rate of ten percent (now 12%) or zero percent
(0%). In taxable transactions, the seller shall be entitled to tax credit for the value-added tax paid on purchases and leases of goods,
properties or services.
(b) An exemption means that the sale of goods, properties or services and the use or lease of properties is not subject to VAT (output tax) and
the seller is not allowed any tax credit on VAT (input tax) previously paid. Thus, a VAT-registered purchaser of goods, properties or services
that are VAT-exempt, is not entitled to any input tax on such purchases despite the issuance of a VAT invoice or receipt.
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G.R. No. 153866. February 11, 2005
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SEAGATE TECHNOLOGY (PHILIPPINES), respondent

FACTS:
Respondent Seagate Technology is a resident foreign corporation with principal office address at Special Economic Zone, Naga, Cebu. It is
registered with the Philippine Export Zone Authority (PEZA) and is a VAT-registered entity. Respondent filed an administrative claim for
refund of VAT input taxes on its purchases of capital goods. Said administrative claim not having been acted upon by petitioner;
respondent elevated the case to the CTA. Petitioner argued that since respondents business is not subject to VAT, the capital goods and
services it alleged to have purchased are considered not used in VAT taxable business. As such, respondent is not entitled to refund of
input taxes on such capital goods. Tax Court rendered a decision granting the claim for refund. The CA affirmed the Decision of the CTA.

ISSUE:
WON, respondent is entitled to the refund.

HELD:
YES! To summarize, special laws expressly grant preferential tax treatment to business establishments registered and operating within an
ecozone, which by law is considered as a separate customs territory. As such, respondent is exempt from all internal revenue taxes,
including the VAT, and regulations pertaining thereto. It has opted for the income tax holiday regime, instead of the 5 percent preferential
tax regime. As a matter of law and procedure, its registration status entitling it to such tax holiday can no longer be questioned. Its sales
transactions intended for export may not be exempt, but like its purchase transactions, they are zero-rated. No prior application for the
effective zero rating of its transactions is necessary. Being VAT-registered and having satisfactorily complied with all the requisites for
claiming a tax refund of or credit for the input VAT paid on capital goods purchased, respondent is entitled to such VAT refund or credit.

For notes only, no need to write:
1. Nature of the VAT and the Tax Credit Method
VAT is a uniform tax ranging, at present, from 0 percent to 12 percent levied on every importation of goods, whether or not in the course of trade or
business, or imposed on each sale, barter, exchange or lease of goods or properties or on each rendition of services in the course of trade or business as
they pass along the production and distribution chain, the tax being limited only to the value added to such goods, properties or services by the seller,
transferor or lessor. It is an indirect tax that may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. Under the
present method that relies on invoices, an entity can credit against or subtract from the VAT charged on its sales or out puts the VAT paid on its purchases,
inputs and imports.

If at the end of a taxable quarter the output taxes charged by a seller are equal to the input taxes passed on by the suppliers, no payment is required. It is
when the output taxes exceed the input taxes that the excess has to be paid. If, however, the input taxes exceed the output taxes, the excess shall be
carried over to the succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-rated transactions or from the acquisition
of capital goods, any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes.

2. Zero-Rated and Effectively Zero-Rated Transactions. Although both are taxable and similar in effect, zero-rated transactions differ from effectively
zero-rated transactions as to their source.



Automatically Zero-rated transactions generally refer to the export sale of goods and supply of services. The tax rate is set at zero. When applied to
the tax base, such rate obviously results in no tax chargeable against the purchaser. The seller of such transactions charges no output tax, but can claim a
refund of or a tax credit certificate for the VAT previously charged by suppliers.

Effectively zero-rated transactions, however, refer to the sale of goods or supply of services to persons or entities whose exemption under special
laws or international agreements to which the Philippines is a signatory effectively subjects such transactions to a zero rate. Again, as applied to the tax
base, such rate does not yield any tax chargeable against the purchaser. The seller who charges zero output tax on such transactions can also claim a
refund of or a tax credit certificate for the VAT previously charged by suppliers.

3. Zero Rating and Exemption. In terms of the VAT computation, zero rating and exemption are the same, but the extent of relief that results from either
one of them is not.

Applying the destination principle to the exportation of goods, automatic zero rating is primarily intended to be enjoyed by the seller who is directly
and legally liable for the VAT, making such seller internationally competitive by allowing the refund or credit of input taxes that are attributable to export
sales. Effective zero rating, on the contrary, is intended to benefit the purchaser who, not being directly and legally liable for the payment of the VAT, will
ultimately bear the burden of the tax shifted by the suppliers.

In both instances of zero rating, there is total relief for the purchaser from the burden of the tax. But in an exemption there is only partial relief, because
the purchaser is not allowed any tax refund of or credit for input taxes paid.

4. Exempt Transaction and Exempt Party. The object of exemption from the VAT may either be the transaction itself or any of the parties to the
transaction.

An exempt transaction, on the one hand, involves goods or services which, by their nature, are specifically listed in and expressly exempted from the
VAT under the Tax Code, without regard to the tax status -- VAT-exempt or not -- of the party to the transaction. Indeed, such transaction is not subject to
the VAT, but the seller is not allowed any tax refund of or credit for any input taxes paid.

An exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to
which the Philippines is a signatory, and by virtue of which its taxable transactions become exempt from the VAT. Such party is also not subject to the VAT,
but may be allowed a tax refund of or credit for input taxes paid, depending on its registration as a VAT or non-VAT taxpayer.

5. Cross-border principle provides that no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial
border of the taxing authority. If exports of goods and services from the Philippines to a foreign country are free of the VAT, then the same rule holds
for such exports from the national territory -- except specifically declared areas -- to an ecozone which by legal fiction is considered a foreign territory.

Sales made by a VAT-registered person in the customs territory to a PEZA-registered entity are considered exports to a foreign country; conversely, sales
by a PEZA-registered entity to a VAT-registered person in the customs territory are deemed imports from a foreign country. An ecozone -- indubitably a
geographical territory of the Philippines -- is, however, regarded in law as foreign soil. If respondent is located in an export processing zone within that
ecozone, sales to the export processing zone, even without being actually exported, shall in fact be viewed as constructively exported under EO
226. Considered as export sales such purchase transactions by respondent would indeed be subject to a zero rate.

6. Tax Refund as Tax Exemption
Respondent, which as an entity is exempt, is different from its transactions which are not exempt. The end result, however, is that it is not subject to the
VAT. The non-taxability of transactions that are otherwise taxable is merely a necessary incident to the tax exemption conferred by law upon it as an entity,
not upon the transactions themselves. Nonetheless, its exemption as an entity and the non-exemption of its transactions lead to the same result.

7. VAT Registration, Not Application for Effective Zero Rating, Indispensable to VAT Refund
Registration is an indispensable requirement under our VAT law. A VAT-registered status, as well as compliance with the invoicing requirements, is sufficient
for the effective zero rating of the transactions of a taxpayer. The nature of its business and transactions can easily be perused from, as already clearly
indicated in, its VAT registration papers and photocopied documents attached thereto. Hence, its transactions cannot be exempted by its mere failure to
apply for their effective zero rating.

8. All Requisites for VAT Refund or Credit
a. A VAT-registered entity
b. Input taxes paid on the capital goods of respondent are duly supported by VAT invoices and have not been offset against any output taxes
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GR Nos. 141104 & 148763 June 8, 2007
Atlas Consolidated Mining Development Corporation vs. Commission of Internal Revenue

FACTS:
Petitioner corporation, a VAT-registered taxpayer engaged in mining production, and sale of various mineral products, filed claims with the
BIR for refund/credit of input VAT on its purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990
and 1992. BIR did not immediately act on the matter prompting the petitioner to file a petition for review before the CTA. The latter denied
the claims on the grounds that for zero-rating to apply, 70% of the companys sales must consists of exports, that the same were not filed
within the 2-year prescriptive period and that petitioner failed to submit substantial evidence to support its claim for refund/credit.

The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and PHILPOS within the EPZA as
zero-rated export sales; the 2-year prescriptive period should be counted from the date of filing of the last adjustment return which was
April 15, 1993, and not on every end of the applicable quarters; and that the certification of the independent CPA at testing to the
correctness of the contents of the summary of suppliers invoices or receipts examined, evaluated and audited by said CPA should
substantiate its claims.

ISSUE:


WON, the petitioner corporation sufficiently established the factual basis for its applications of input VAT refund.

HELD:
NO! Although the Court agreed with the petitioner corporation that the two-year prescriptive period for the filing of claims for refund/credit of
input VAT must be counted from the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are
taxed as exports having been sold to export processing zones which are considered as separate customs territory, and thus, for tax
purposes, effectively considered as foreign territory , it validly denied the claims of petitioner corporation. Petitioner failed to establish and
substantiate its claim by appropriate and sufficient evidence. Tax refunds are regarded as a derogation of the sovereign authority, and
should be construed in strictissimi juris against the person or entity claiming the exemption. The taxpayer who claims for exemption must
justify his claim by the clearest grant of organic or statue law and should not be permitted to stand on vague implications.
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G.R. No. 153204 August 31, 2005
CIR, Petitioners, vs. MANILA MINING CORPORATION, Respondent

FACTS:
In 1991, respondent sold gold to the Central Bank (now Bangko Sentral ng Pilipinas) for which it filed VAT returns in the 4 quarters of 1991.
Relying on the letter of then Commissioner Victor Deoferio that such sale is subject to zero-rating under Section 100(a)(1) of the NIRC,
respondent filed for a refund/credit of input VAT it paid from July 1-Dec. 31, 1999. Upon failure of the CIR to act upon respondents
application, a petition for refund was filed before the CTA which denied such petition. On appeal, the CA reversed the CTAs decision.

ISSUE:
WON, respondent adduced sufficient evidence to prove its claim for refund of its input VAT for taxable year 1991.

HELD:
NO! Sale of gold to the Central Bank should not be subject to the 10% VAT-output tax but this does not ipso facto mean that the seller is
entitled to the amount of refund sought as it is required by law to present evidence showing the input taxes it paid during the year in
question. What is being claimed in the instant petition is the refund of the input taxes paid by the herein petitioner on its purchase of goods
and services. For a judicial claim for refund to prosper, however, respondent must not only prove that it is a VAT registered entity and that it
filed its claims within the prescriptive period. It must substantiate the input VAT paid by purchase invoices or official receipts. This
respondent failed to do. Mere listing of VAT invoices and receipts, even if certified to have been previously examined by an independent
certified public accountant, would not suffice to establish the truthfulness and accuracy of the contents thereof unless offered and actually
verified by this Court.

For notes only, no need to write:
1. A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the prices charged therefor or a list by whatever
name it is known which is used in the ordinary course of business evidencing sale and transfer or agreement to sell or transfer goods and services.

A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or other settlementbetween seller and buyer of goods,
debtor or creditor, or person rendering services and client or customer.
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G.R. No. 172087 March 15, 2011
PAGCOR, Petitioner, vs. CIR, Public Respondent, JOHN DOE and JANE DOE, who are persons acting for, in behalf, or under the
authority of Respondent, Public and Private, Respondents

FACTS:
PAGCOR was created pursuant to Presidential Decree (P.D.) No. 1067-A on January 1, 1977. Subsequently, several enactments were
made exempting PAGCOR from payment of taxes. One of which was R.A. No. 8424, known as the National Internal Revenue Code of
1997, which took effect on January 1, 1998. Section 27 (c) of R.A. No. 8424 provides that government-owned and controlled corporations
(GOCCs) shall pay corporate income tax, except petitioner PAGCOR, GSIS, SSS, PhilHealth and PCSO. On May 24, 2005, R.A. No. 9337
was enacted which amended certain sections of the NIRC of 1997. The particular amendment that is at issue in this case is Section 1 of
R.A. No. 9337, which excluded PAGCOR from the enumeration of GOCCs that are exempt from payment of corporate income tax.
Following the Supreme Courts decision upholding the constitutionality of RA 9337, respondent BIR issued Revenue
Regulations, specifically identifying PAGCOR as subject to 10% VAT imposed under Section 108 of the NIRC of 1997, as amended by
R.A. No. 9337. Hence, the present petition for certiorari filed by PAGCOR.

ISSUE:
WON, PAGCOR is subject to VAT with the enactment of R.A. No. 9337.

HELD:
NO! The provision subjecting PAGCOR to 10% VAT as provided in the Revenue Regulation issued by the BIR is invalid for being contrary
to R.A. No. 9337. Nowhere in R.A. No. 9337 is it provided that petitioner can be subjected to VAT. R.A. No. 9337 is clear onl y as to the
removal of petitioner's exemption from the payment of corporate income tax which as provided by this court is valid and thus, makes
PAGCOR liable for payment of corporate income tax. However, R.A. No. 9337 itself exempts petitioner from VAT pursuant to Section 7 (k)
thereof, which recognizes as exempt those transactions considered as exempt under international agreements to which the Philippines is a
signatory or under special laws. Hence, petitioner is exempt from the payment of VAT, because PAGCORs charter, P.D. No. 1869, is a
special law that grants petitioner exemption from taxes. Also, as correctly pointed out by petitioner, although R.A. No. 9337 introduced


amendments by imposing VAT on other services not previously covered, it did not amend the porti on of Section 108 (B) (3) that subjects to
zero percent rate services performed by VAT-registered persons to persons or entities whose exemption under special laws or international
agreements to which the Philippines is a signatory effectively subjects the supply of such services to 0% rate, to which PAGCOR belongs.
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G.R. No. 168129 April 24, 2007
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. PHILIPPINE HEALTH CARE PROVIDERS, Respondent

FACTS:
Respondent Philippine Health Care Providers is a health maintenance organization engaged in the delivery of health care systems to sick
and disabled persons enrolled in the health care plan. Before the effectivity of E.O. No. 273 (imposing Value-Added Tax (VAT) on the sale
of goods and services), or on December 10, 1987, respondent wrote the Commissioner of Internal Revenue (CIR), petitioner, inquiring
whether the services it provides to the participants in its health care program are exempt from the payment of the VAT. Petitioner CIR
stated that respondent, as a provider of medical services, is exempt from the VAT coverage.

Upon the enactment of RA 7716 (Expanded VAT or E-VAT Law) and RA 8424 (NIRC of 1997), BIR sent respondent an assessment for
deficiency VAT and documentary stamp taxes (DST) for taxable years 1996 and 1997. Respondent filed a protest with the BIR. CTA held
that petitioner is a service contractor subject to VAT since it does not actually render medical service but merely acts as a conduit between
the members and petitioner's accredited hospitals and clinics. However, petitioner is entitled to the benefit of non-retroactivity of rulings
guaranteed under Section 246 of the Tax Code, in the absence of showing of bad faith on its part. On appeal, CTA reversed its decision
upheld the exemption of respondent. Petitioner CIR appealed to the CA. CA affirmed the CTAs decision.

ISSUE:
WON, respondents health care services are subject to VAT.

HELD:
YES! Section 102 of the National Internal Revenue Code of 1977, as amended by E.O. No. 273 (VAT Law) and R.A. No. 7716 (E-VAT
Law), provides for a value-added tax equivalent to 10% of gross receipts derived from the sale or exchange of services, including the use
or lease of properties. Under Section 103 of the same Code, one of the exempt transactions are the medical, dental, hospital and
veterinary services except those rendered by professionals. As found the CTA, respondent is not actually rendering medical service but
merely acting as a conduit between the members and their accredited and recognized hospitals and clinics. It merely provides and
arranges for the provision of pre-need health care services to its members for a fixed prepaid fee for a specified period of time. It
then contracts the services of physicians, medical and dental practitioners, clinics and hospitals to perform such services to its enrolled
members. As respondent does not actually provide medical and/or hospital services, as provided under Section 103 on exempt
transactions, but merely arranges for the same, its services are not VAT-exempt. However, respondent is still not liable to pay since the
ruling issued by the CIR is non-retroactive since the petitioner acted in good faith.

For notes only, no need to write:
General Rule: Rulings, circulars, rules and regulations promulgated by the Commissioner of Internal Revenue have no retroactive application if to apply
them would prejudice the taxpayer.
Exceptions:
1. Taxpayer deliberately misstates or omits material facts from his return or in any document required of him by BIR
2. The facts subsequently gathered by the BIR are materially different from the facts on which the ruling is based
3. Taxpayer acted in bad faith
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G.R. No. 158885 & 170680 October 2, 2009
FORT BONIFACIO DEVELOPMENT CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

FACTS:
Petitioner was a real estate developer who bought from the national government a parcel of land that used to be the Fort Bonifacio military
reservation. At the time of the said sale there was as yet no VAT imposed; hence, petitioner did not pay any VAT on its purchase.
Subsequently, petitioner sold two parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes (VAT tax being
imposable in the interim), petitioner claimed transitional input VAT corresponding to its inventory of land. The BIR disallowed the claim of
presumptive input VAT and thereby assessed petitioner for deficiency VAT payments.

ISSUE:
WON, petitioner entitled to claim the transitional input VAT on its sale of real properties given its nature as a real estate dealer.

HELD:
YES! Petitioner is entitled to claim transitional input VAT based on the value of not only the improvements but on the value of the entire real
property and regardless of whether there was in fact actual payment on the purchase of the real property or not. The amendments to the
VAT law do not show any intention to make those in the real estate business subject to a different treatment from those engaged in the sale
of other goods or properties or in any other commercial trade or business. On the scope of the basis for determining the available
transitional input VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in Section 105 of the Tax Code without
statutory authority or basis. The transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they
previously paid taxes in the acquisition of their beginning inventory of goods, materials and supplies.
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G.R. No. 157594 March 9, 2010


TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC., Petitioner, vs. CIR, Respondent

FACTS:
Petitioner Toshiba is registered with PEZA as an ECOZONE export enterprise in the Laguna Technopark. In its VAT returns for the first and
second quarters of 1997, Toshiba initially declared input VAT payments on its domestic purchases of taxable goods and services with no
zero-rated sales. Subsequently, it submitted an amended VAT returns for the same period reporting the same input VAT payments but this
time with zero rated sales. Following said amended returns, Toshiba filed two separate applications for tax credit/refund of its unutilized
input VAT payments for the first half of 1997. CIR opposed the claim for tax refund/credit of Toshiba. When brought before the CTA, CTA
decided in favor of Toshiba. On appeal, the CA reversed the decision of the CTA. Hence, this petition filed by Toshiba.

ISSUE:
WON, Toshiba is entitled to claim refund for its alleged zero rated sales.

HELD:
YES! The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the
cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services
from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be
imposed with ten percent (now 12%) VAT. Hence, any sale of goods, property or services made by a VAT registered supplier from the
Customs Territory to any registered enterprise operating in the ecozone, regardless of the class or type of the latters PEZA registration, is
actually qualified and thus legally entitled to the zero percent (0%) VAT. As such, Toshiba is entitled to claim refund for its unutilized input
VAT payments related to its zero-rated sales.
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G.R. No. 193301 March 11, 2013 [2D]
MINDANAO II GEOTHERMAL PARTNERSHIP, Petitioner, vs. CIR, Respondent
x - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 194637
MINDANAO I GEOTHERMAL PARTNERSHIP, Petitioner, vs. CIR, Respondent

FACTS:
Both Mindanao I and II are separate partnership entities registered with the SEC, VAT payers registered with the BIR, and Block Power
Production Facilities accredited by the DOE. Mindanao I and IIs only revenue-generating activity is the sale of its generated power to
National Power Corporation. Both partnerships contend that following the enactment of RA9136 or the Electric Power Industry Reform Act
of 2000 (EPIRA), sales of power by generation companies such as their case are categorized as zero rated VAT transactions. Pursuant to
this change, Mindanao I and II filed with the CIR claims for refund or tax credit of accumulated unutilized and/or excess input taxes due to
VAT zero-rated sales in 2003. Said application for refund by Mindanao II, however, remains un-acted upon by the CIR while that of
Mindanao I was denied. Hence, the filling of this petition by both partnership entities. Mindanao I and II filed their claims in 2005.

ISSUES:
WON, the two-year prescriptive period should be reckoned from the end of the taxable quarter when the sales were made for purposes of
tax refund or credit.

HELD:
YES! When Mindanao II and Mindanao I filed their respective administrative and judicial claims in 2005, the 1997 Tax Code, which took
effect on 1 January 1998, was the applicable law at the time of filing of the claims in issue. Section 112(A) of the 1997 Tax Code is clear:
"Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable
to such sales..."

Wherefore, we rule on Mindanao I and IIs administrative claims for the first, second, third, and fourth quarters of 2003 as follows: (1)The
tax refund or credit for the first quarter of 2003 having been filed beyond the 2-year prescriptive period, said claim is denied for having
prescribed and (2) The tax refund or credit for the second, third and fourth quarters of 2003 having been filed within the 2-year prescriptive
period, said claims are granted for having been filed on time.
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G.R. No. 187485 February 12, 2013 [E]
CIR, Petitioner, vs. SAN ROQUE POWER CORPORATION, Respondent
X----------------------------X
G.R. No. 196113
TAGANITO MINING CORPORATION, Petitioner, vs. CIR, Respondent
x----------------------------x
G.R. No. 197156
PHILEX MINING CORPORATION, Petitioner, vs. CIR, Respondent

FACTS:
The case involves three consolidated cases filed by three distinct corporate entities in three different petitions. The first involves San
Roque, a domestic corporation engaged in the operation of power-generating plants under a contract with the Government of the
Philippines. San Roque entered into a Power Purchase Agreement (PPA) with the National Power Corporation ("NPC") to develop hydro-


potential of the Lower Agno River and generate additional power and energy for the Luzon Power Grid, by building the San Roque Multi -
Purpose Project. On the construction and development of said project, San Roque allegedly incurred excess input VAT for taxable year
2001. San Roque duly filed with the BIR an amended claim for refund representing unutilized input taxes on March 28, 2003. CIRs alleged
inaction on the subject claims led to the filing by San Roque of this petition before the Court of Tax Appeals on April 10, 2003.

The second and third cases involve Taganito Mining Corporation and Philex Mining Corporation, respectively, both engaged in the
exploration and operation of mine properties and commercial production and marketing of mine products. On November 14, 2006, Taganito
filed with the CIR a claim for tax credit/refund of its supposed unutilized input VAT on domestic purchases of goods and services and on
importation of capital goods for the period covering January 1, 2005 to December 31, 2005. As the statutory period within which to file a
claim for refund for said input VAT is about to lapse without action on the part of the CIR, Taganito filed the instant Petition for Review on
February 17, 2007. Philex, on the other hand, filed its claim for refund/tax credit on March 20, 2006. However, due to the CIRs failure to act
on such claim, on October 17, 2007 it filed a petition for review before the Court of Tax Appeals.

ISSUE:
WON, San Roque, Taganito and Philex corporations filed their respective tax refund/credit within the 120+30 day reglementary period.

HELD:
NO, all three corporations failed to file their respective tax refund within the reglementary period!

In the case of San Roque, a mere 13 days after it filed its amended administrative claim with the Commissioner; it filed a Petition for
Review with the CTA. Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to the
Commissioner to decide whether to grant or deny San Roques application for tax refund or credit. It is indisputable that compliance with
the 120-day waiting period is mandatory and jurisdictional. Failure to comply with the 120-day waiting period violates a mandatory
provision of law. It violates the doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a
cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayers petition.

Like San Roque, Taganito also filed its petition for review with the CTA without waiting for the 120-day period to lapse. However, Taganito
can invoke BIR Ruling No. DA-489-03

dated 10 December 2003, which expressly ruled that the "taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review." Taganito filed its judicial
claim after the issuance of BIR Ruling No. DA-489-03. Thus, Taganito is deemed to have filed its judicial claim with the CTA on time.

Although, Philex timely filed its administrative claim on 20 March 2006, within the two-year prescriptive period reckoned from 30 September
2005, which is the close of the third taxable quarter in 2005. The Commissioner had until 17 July 2006, the last day of the 120-day period,
to decide Philexs claim. Since the Commissioner did not act on Philexs claim on or before 17 July 2006, Philex had until 17 August 2006,
the last day of the 30-day period, to file its judicial claim. However, Philex only filed its judicial claim on 17 October 2007. Unlike San Roque
and Taganito, Philexs case is not one of premature filing but of late filing. Philex filed its judicial claim long after the expiration of the 120-
day period, in fact 426 days after the lapse of the 120-day period. The inaction of the Commissioner on Philexs claim during the 120-day
period is, by express provision of law, "deemed a denial" of Philexs claim. Philex had 30 days from the expiration of the 120-day period to
file its judicial claim with the CTA. The right to appeal to the CTA from a decision or "deemed a denial" decision of the Commissioner is
merely a statutory privilege, not a constitutional right. The exercise of such statutory privilege requires strict compliance with the conditions
attached by the statute for its exercise.

Philex failed to comply with the statutory conditions and must thus bear the consequences.

For Notes only, no need to write:
Summary of Rules on Prescriptive Periods Involving refund or credit of unutilized input VAT as provided in Section 112 of the 1997 Tax Code, as
follows:
(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the zero-rated or effectively
zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim within which to decide
whether to grant a refund or issue a tax credit certificate. The 120-day period may extend beyond the two-year period from the filing of the
administrative claim if the claim is filed in the later part of the two-year period. If the 120-day period expires without any decision from the
CIR, then the administrative claim may be considered to be denied by inaction.
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIRs decision denying the administrative claim or from the
expiration of the 120-day period without any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this
Court in Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional 120+30 day periods.
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G.R. No. L-26806 July 30, 1970
CIR petitioner, vs. ROYAL INTEROCEAN LINES and CTA, respondents

FACTS:
Royal Interocean Liner, Inc. is a foreign corporation with head office in Amsterdam, Holland. The taxpayer is likewise, an agent and
representative of the Holland East Asia Lines, a Dutch shipping company, from which the taxpayer receive compensation in the form of
commissions for services rendered. From February to May, 1962 vessels of the taxpayer and/or the Holland East Asia Lines called at
Philippine ports to load cargo. Freight revenues for said services were directly paid to the taxpayer's head office in Holland without actually
passing through the branch in the Philippines. Prior to January, 1962, its dollar earnings derived from freight revenues were converted into
the Philippine peso equivalent under the prevailing free market rate, for purposes of the common carrier's tax prescribed in Section 192 of
the National Internal Revenue Code. Thereafter, the taxpayer discontinued this practice and, since February, 1962, it reported said


revenues, in its monthly returns for carrier's tax, based on the parity rate of P2 to $1. Upon examination of the records of the taxpayer, the
Commissioner of Internal Revenue demanded for payment of deficiency common carrier's tax applying the free market conversion rate.

Royal Interocean protested against this deficiency assessment on the ground that the conversion rate should be the parity rate of P2 to a
US dollar, not the current market rate, it being conceded that the freight fees in question had not been physically remitted to its Philippine
branch but were actually collected by its head office abroad, which had remitted no funds to the former, except those needed for its
operating expenses. The CIT denied the protest. On appeal, the CTA ruled in favor of the taxpayer and reversed the CIR decision.

ISSUE:
WON, the current market rate or the parity rate should be used in computing for the Peso equivalent of the taxpayers foreign currency
denominated transactions.

HELD:
CURRENT MARKET RATE! The present case refers to transactions that took place during the effectivity of Republic Act 2609, when there
was, apart from the parity rate, a legal free market conversion rate for foreign exchange transactions, which rate had been fixed in open
trading. Regardless of the fact that the freight revenues did not actually pass through the Philippine branch; having been collected by the
taxpayer's main office in Amsterdam, said fees are deemed to have been paid to the taxpayer in the Philippines, on behalf of which the
branch had acted. Because they were due for services rendered in the Philippines and for services performed by a resident of the
Philippines the taxpayer's branch office therein; it is our considered view that the freight revenues accruing to the taxpayer in the present
case, even though collected abroad and, not remitted to its branch office in the Philippines, are part of its foreign exchange operations and
subject to the common carrier's tax, computed at the free market rate then prevailing.
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G.R. No. 150947 July 15, 2003
CIR, petitioner, vs. MICHEL J. LHUILLIER PAWNSHOP, INC., respondent

FACTS:
Sometime in March 1991, CIR Jose U. Ong issued Revenue Memorandum Order (RMO) imposing a 5% lending investors tax on
pawnshops. Pursuant to these issuances, the Bureau of Internal Revenue (BIR) issued assessment notice against Lhuillier demanding
payment of deficiency percentage tax for the year 1994. Lhuillier filed an administrative protest contending that pawnshops are different
from lending investors, which are subject to the 5% percentage tax and that said RMO is a new and additional tax measure on pawnshops,
which only Congress could enact. Due to inaction of the CIR, Lhuillier filed an appeal before the CTA. The CTA ruled in favor of Lhuilllier.
Dissatisfied, the CIR filed a petition for review with the Court of Appeals. The CA affirmed the CTAs decision.

ISSUE:
WON, pawnshops are considered as "lending investors and, hence, subject to the 5% lending investors tax.

HELD:
NO! While it is true that pawnshops are engaged in the business of lending money, they are not considered "lending investors" for the
purpose of imposing the 5% percentage taxes for the following reasons: First, pawnshops and lending investors were subjected to different
tax treatments eversince the enactment of NIRC of 1977 and NIRC of 1986. Second, Congress never intended pawnshops to be treated in
the same way as lending investors as shown in its subsequent enactments. Third. Section 116 of the NIRC of 1977, as amended by E.O.
No. 273, subjects to percentage tax dealers in securities and lending investors only. There is no mention of pawnshops. Under the maxim
expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another thing not mentioned. And lastly, the BIR had
ruled several times prior to the issuance of the questioned RMO that pawnshops were not subject to the 5% percentage tax imposed by
Section 116 of the NIRC of 1977, as amended by E.O. No. 273. Hence, pawnshops are not subject to the 5% lending investors tax.
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G.R. No. 147375 June 26, 2006
CIR, Petitioner, vs. BANK OF THE PHILIPPINE ISLANDS, Respondent

FACTS:
As a domestic corporation, the interest earned by respondent Bank of the Philippine Islands (BPI) from deposits and similar arrangements
are subjected to a final withholding tax of 20%. Consequently, the interest income it receives on amounts that it lends out are always net of
the 20% withheld tax. As a bank, BPI is furthermore liable for a 5% gross receipts tax on all its income. For the four quarters of the year
1996, BPI computed its 5% gross receipts tax payments by including in its tax base the 20% final tax on interest income that had been
withheld and remitted directly to the Bureau of Internal Revenue (BIR). However, following the CTAs decision, in a separate case, holding
that the 20% final tax withheld on a banks interest income did not form part of its taxable gross receipts for the purpose of computing gross
receipts tax; BPI requested for refund of alleged overpayment of taxes representing 5% gross receipts taxes paid on the 20% final tax
withheld at source.

Inaction by the BIR on this request prompted BPI to file a Petition before the CTA. The CTA following its earlier pronouncement, decided in
favor of BPI. On appeal, the CA affirmed the decision of CTA.

ISSUE:
WON, the 20% final tax withheld on a banks passive income should be included in the computation of the gross receipts tax.

HELD:


YES! The Tax Code does not provide a definition of the term "gross receipts."Accordingly, the term is properly understood in its plain and
ordinary meaning

and must be taken to comprise of the entire receipts without any deduction. Deducting any amount from the gross
receipts changes the result, and the meaning, to net receipts. Any deduction from gross receipts is inconsistent with a law that mandates a
tax on gross receipts, unless the law itself makes an exception. Furthermore, Section 119 (a)

of the Tax Code expressly includes interest
income as part of the base income from which the gross receipts tax on banks is computed. This express inclusion of interest income in
taxable gross receipts creates a presumption that the entire amount of the interest income, without any deduction, is subject to the gross
receipts tax.

The Court of Appeals contention that it would be "unjust and confiscatory to include the withheld 20% final tax in the tax base said amount
not having been received by the taxpayer" is without merit. Receipt of income may be actual or constructive. We have held that the
withholding process results in the taxpayers constructive receipt of the income withheld. Thus, BPI constructively received income by virtue
of its acquiescence to the extinguishment of its 20% final tax liability when the withholding agents remitted BPIs income to the government.
Consequently, it received the amounts corresponding to the 20% final tax and benefited therefrom.
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G.R. No. 119122 August 8, 2000
PHILIPPINE BASKETBALL ASSOCIATION vs. CA

FACTS:
PBA received a tax assessment from the BIR for deficiency on amusement taxes. PBA contested the said deficiency on amusement taxes.
Petitioner contends that PD 231, known as the Local Tax Code of 1973, transferred the power and authority to levy and collect amusement
taxes from the sale of admission tickets to places of amusement from the national government to the local governments. The CTA denied
the complaint. On appeal, the CA affirmed the CTAs decision. PBA now raises the case to the SC.

ISSUES:
WON, the national government or the local government has jurisdiction to impose amusement taxes on the PBA.

HELD:
With the reference to PD 871 by PD 1456 and PD 1959, there is a recognition under the laws of this country that the amusement tax on
professional basketball games is a national, and not a local, tax. Even up to the present, the category of amusement taxes on professional
basketball games as a national tax remains the same. This is so provided under Section 125 of the 1997 National Internal Revenue Code.
Section 140 of the Local Government Code of 1992 (Republic Act 7160), meanwhile, retained the areas (theaters, cinematographs, concert
halls, circuses and other places of amusement) where the province may levy an amusement tax without including therein professional
basketball games.
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G.R. No. 119761; August 29, 1996
CIR vs. CA, CTA and FORTUNE TOBACCO CORP.

FACTS:
Fortune Tobacco Corporation is engaged in the manufacture of different brands of cigarettes. BIR classified them as foreign brands since
they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune changed the names of 'Hope' to
'Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. A 45% Ad Valorem taxes
were imposed on these brands. Then RA No. 7654 was enacted 55% for locally manufactured foreign brand while 45% for locally
manufactured brands. 2 days before the effectivity of RA 7654, BIR issued a Revenue Memorandum Circular (RMC) saying that since
there is no showing who the real owner/s are of Champion, Hope and More, the same shall be considered locally manufactured foreign
brand for purposes of determining the ad valorem tax - 55%. Without following the legal requirements for the validity of the RMC, CIR
assessed Fortune Tobacco for ad valorem tax deficiency. Fortune Tobacco filed a petition for review with the CTA. Both the CTA and CA
upheld the position of Fortune.

ISSUE:
WON, it was necessary for BIR to follow the legal requirements when it issued its RMC.

HELD:
YES. The RMC issued by BIR cannot be viewed simply as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and
most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of local ly
manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654 which subjected mentioned brands to 55%.
The BIR not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of
notice, of hearing, and of publication should not have been then ignored. When an administrative rule is merely interpretative in nature, its
applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already
prescribed. But when, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render
least cumbersome the implementation of the law but substantially increases the burden of those governed, the agency must accord, at
least to those directly affected, a chance to be heard, before that new issuance is given the force and effect of law.
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GR No. 173594 February 06, 2008
Silkair PTE, LTD. vs. CIR

FACTS:


Silkair, an online international air carrier organized under the laws of Singapore, filed with the Bureau of Internal Revenue (BIR) a written
application for the refund of excise taxes it claimed to have paid on its purchases of jet fuel from Petron Corporation from January to June
2000. As the BIR had not yet acted on the application, Silkair filed a Petition for Review before the CTA. Opposing the petition, respondent
CIR alleged that petitioner failed to prove that the sale of the petroleum products was directly made from a domestic oil company to the
international carrier. CTA denied Silkairs petition; hence, this appeal.

ISSUE:
WON, Silkair may claim for the refund of excise taxes erroneously paid.

HELD:
NO. The excise tax was imposed on Petron Corporation as the manufacturer of petroleum products, any claim for refund should be filed by
the latter; and where the burden of tax is shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost
of the goods purchased which constitutes a part of the purchase price. Therefore, the right to claim for the refund of excise taxes paid on
petroleum products lies with Petron Corporation who paid and remitted the excise tax to the BIR. Respondent, on the other hand, may only
claim from Petron the reimbursement of the tax burden shifted to the former by the latter. The excise tax partaking the nature of an indirect
tax is clearly the liability of the manufacturer or seller who has the option whether or not to shift the burden of the tax to the purchaser. In
sum, the incidence of taxation or the person statutorily liable to pay the tax falls on Petron though the impact of taxation or the burden of
taxation falls on another person, which in this case is petitioner Silkair.
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G.R. No. 118043. July 23, 1998
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, petitioner, vs. CA and CIR, respondents

FACTS:
Petitioner, now the Jardine-CMG Life Insurance Company, is a domestic corporation engaged in the life insurance business. In 1984, it
issued 50,000 shares of stock as stock dividends, with a par value of P100 or a total of P5 million. Petitioner paid documentary stamp taxes
on each certificate on the basis of its par value. The question in this case is whether in determining the amount to be paid as documentary
stamp tax, it is the par value of the certificates of stock or the book value of the shares which should be considered. The Commissioner of
Internal Revenue took the view that the book value of the shares should be used as basis. Accordingly, respondent Internal Revenue
Commissioner issued a deficiency documentary stamp tax assessment in excess of the par value of the stock dividends. Petitioner
appealed the Commissioners ruling to the Court of Tax Appeals. The CTA ruled that the amount of the documentary stamp tax should be
based on the par value stated on each certificate of stock. On appeal, the Court of Appeals reversed the CTAs decision. Hence, this
petition.

ISSUE:
Whether the par value of the certificates of stock or the book value of the shares which should be used in determining documentary stamp
tax due

HELD:
Par Value! Stock dividends are shares of stock and not certificates of stock which merely represent them. There is, therefore, no reason for
determining the actual value of such dividends for purposes of the documentary stamp tax if the certificates representing them indicate a
par value. A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but is an excise upon
the privilege, opportunity or facility offered at exchanges for the transaction of the business. It is an excise upon the facilities used in the
transaction of the business separate and apart from the business itself. With respect to stock certificates,
it is levied upon the privilege of issuing them; not on the property received by the issuing company for such certificates; neither is it
imposed upon the share of stock. As Justice Learned Hand pointed out in one case, documentary stamp tax is levied on the document and
not on the property which it described.
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G.R. No. 119176 March 19, 2002
Commissioner of Internal Revenue vs. Lincoln Philippine Life Insurance Co., Inc

FACTS;
Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) issued a special kind of life insurance policy
known as the "Junior Estate Builder Policy" with a distinguishing feature. It had an "automatic increase clause" upon attainment of a
certain age by the insured. Commissioner of Internal Revenue issued deficiency documentary stamps tax assessment for the year 1984
pertaining to the amount in the automatic increase clause. Lincoln questioned the deficiency assessments. The Court of Tax Appeals found
no valid basis and cancelled it. CA affirmed CTA. Hence, this petition.

ISSUE:
Whether, the "automatic increase clause" should be taxed with the main policy.

HELD:
YES! Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set
forth. Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause,
mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance. The amount fixed in the policy is the
figure written on its face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the
policy without the need of another contract. The amount insured by the policy at the time of its issuance necessarily included the additional


sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and
formed part of the policy. To claim that the increase in the amount insured by virtue of the automatic increase clause should not be included
in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be
computed on the basis of the amount insured by the policy.
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GR No. 172359, Oct. 2, 2009
China Banking Corporation vs. Commissioner of Internal Revenue

FACTS:
Petitioner China Banking Corporation, a universal banking corporation, was engaged in the transaction of accepting special savings
deposits (SSD), otherwise known as Savings plus Deposit. Sometime in 1999, petitioner received a assessment issued by respondent
Commission on Internal Revenue, assessing it for deficiency documentary stamp tax on its Reverse Repurchase Agreements (RRA) and
SSDs for the taxable years 1994 to 1997. Petitioner filed a formal protest reiterating its position that the RRAs and SSDs were not subject
to documentary stamp tax. Respondent rendered a Decision resolving to cancel and withdraw the assessments for deficiency documentary
stamp tax on petitioners RRAs covering the taxable years 1994 to 1996. However, said decision affirmed the assessments for alleged
deficiency documentary stamp tax on petitioners RRAs and SSDs for the year 1997. Petitioner appealed to the CTA which rendered a
decision affirming the assessment of deficiency documentary stamp tax on its SSDs and reversed that for RRAs. On appeal, the CTA en
banc ruled that a deposit account which has the same features as a time deposit account is subject to the Documentary Stamp Tax.

ISSUE:
Whether or not Special Savings Deposits are subject to documentary stamp tax

HELD:
YES! China banks special savings deposits (SSD), otherwise known as Savings Plus Deposit, are certificates of deposits drawing
interest subject to documentary stamp tax. From said enumeration, the CTA en banc held that petitioners SSDs fall under the category of
certificates of deposit drawing interest. Savings Plus Deposit Account, which has the following features: (1) Amount deposited is
withdrawable anytime; (2) The same is evidenced by a passbook; and (3) The rate of interest offered is the prevailing market rate, provided
the depositor would maintain his minimum balance in thirty (30) days at the minimum, and should he withdraw before the period, his
deposit would earn the regular savings deposit rate. Thus, it is subject to documentary stamp tax having been considered certificates of
deposit drawing interests.
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GR No. 171138, April 7, 2009
Tambunting Pawnshop Inc vs. CIR

FACTS:
CIR assessed Tambunting pawnshop for deficiency Value-Added Tax for the taxable year 1999. Tambunting alleged that it is NOT liable
for tax because a pawnshop is not enumerated as one of those engaged in "sale or exchange of services" in Section 108 of the NIRC. The
nature of the business of pawnshops does not fall under "service" as defined under the Legal Thesaurus of William C. Burton.

ISSUE:
Whether Pawnshops are subject to VAT pursuant to Section 108 (A) of NIRC.

HELD:
At the time of the disputed assessment, that is, for the year 2000, pawnshops were not subject to 10% VAT under the general provision on
"sale or exchange of services" as defined under Section 108 (A) of the Tax Code of 1997, which states: "'sale or exchange of services'
means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration . . . ." The levy,
collection and assessment of the 10% VAT on banks, non-bank financial intermediaries, finance companies, and other financial
intermediaries not performing quasi-banking functions were finally made effective beginning January 1, 2003. Finally, with the enactment of
R.A. No. 9238 in 2004, the services of banks, nonbank financial intermediaries, finance companies, and other financial intermediaries not
performing quasi-banking functions were specifically exempted from VAT, and the 0% to 5% percentage tax on gross receipts on other
non-bank financial intermediaries was re-imposed under Section 122 of the Tax Code of 1997. Coming now to the issue at hand - Since
petitioner is a non-bank financial intermediary: For the tax years 1996-2002 it is actually subject to 10% VAT. However, with the levy,
assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by law then petitioner is NOT liable for
VAT during these tax years. January 1, 2003 petitioner is LIABLE for 10% VAT for said tax year with the full implementation of the VAT
system on non-bank financial intermediaries starting this date. Beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is
NO longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5%, as the case may be.

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