PART V

TAX REMEDIES
CHAPTER XXIV

TAX1.8 Commissioner of Customs v. Hypermix Feeds Corp.

FACTS: Facts: The Commissioner of Customs issued a CM which involves classification of wheat subject to different tax rate. the
respondent filed a Petition for Declaratory Relief with the RTC.

The petitioners thereafter filed a motion to dismiss contending, among others, that the RTC does not have jurisdiction of the subject
matter. the RTCt rendered a decision ruling in favor of the respondent. It held that the jurisdiction is properly held because the
subject matter is quasi-legislative in nature. The petitioners then appealed to CA but it was, however, dismissed.

ISSUE: Did the CA erred in upholding the trial court’s jurisdiction on the case?

RULING: NO. The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the law
or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power of judicial review or the
power to declare a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance, or regulation
in the courts, including the RTCs.

TAX3.8 British American Tobacco Corp. v. Comacho

FACTS: Petitioner filed before the RTC a petition for injunction to enjoin the implementation of Sec. 145 of the NIRC and the RR
related to it on the ground that they discriminate against new brands of cigarettes in violation of the equal protection and uniformity
provisions of the Constitution because cigarettes shall be taxed according to their current net retail price while existing or old brands
shall be taxed based on their net retail price as of October 1, 1996. This was dismissed by the RTC.

While petitioner's appeal was pending, RA 9334 amending Sec. 145 of the 1997 NIRC which in effect increased petitioners excise
tax to P25/pack

Hence, petitioner filed a Motion assailing the constitutionality of RA 9334. Subsequently, other cigarette brands intervened.
Fortune Tobacco claims that the challenge to the validity of the BIR issuances should have been brought by petitioner before the
Court of Tax Appeals (CTA) and not the RTC because it is the CTA which has exclusive appellate jurisdiction over decisions of
the BIR in tax disputes.

ISSUE: W/N the RTC rather than the CTA has jurisdiction.

HELD: Yes. Petitions involving the validity of a regulation or other administrative issuance must be filed with the regular courts
and not with the CTA

TAX8.8 Collector v. Benipayo

FACTS: Benipayo is the owner and operator of the Lucena Theater. An Internal Revenue Agent’s investigation of the operation
of Benipayo’s theater concluded that respondent must have fraudulently sold two tax-free tickets, in order to avoid payment of the
amusement tax. Based on the average ratio between adult and children attendance in the past years, Examiner recommended a
deficiency amusement tax assessment against respondent.

Benipayo filed protest. After due hearing, the Conference Staff found that the “meager reports of these fieldmen (Examiner and the
Provincial Revenue Agent) are mere presumptions and conclusions, devoid of findings of the fact of the alleged fraudulent practices
of the herein taxpayer”

ISSUE: Whether there is sufficient evidence in the record showing that Benipayo sold and issued to his adult customers two tax-
free 20-centavo children’s tickets, instead of one 40-centavo ticket for each adult customer; to cheat or defraud the Government.

RULING: This was admitted by the respondent. This practice was, however, discontinued when he was informed by the Bureau
of Internal Revenue that it was not in accordance with law.

An assessment fixes and determines the tax liability of a taxpayer. Hence, assessments should not be based on mere presumptions
no matter how reasonable or logical said presumptions may be.
TAX1.9 Interprovincial Autobus Co. v. Collector

FACTS: Interprovincial Autobus Co. was not able to preserve the receipt stubs from 1936 to 1938. The provincial revenue agent
ascertained the number of receipts by referring to the conductor’s daily report for the said period. But said report did not state the
value of the goods transported thereunder. Pursuant, however, to the Revised Documentary Stamp Tax Regulations of the
Department of Finance, he assumed that the value of the goods covered by each of the above- mentioned freight receipts amounted
to more than P5, and assessed a documentary stamp tax of P0.04 on each of the 194,406 receipts. The tax thus was collected from
the Plaintiff. Plaintiff demanded the refund of the amount, and upon refusal of the Defendant, Plaintiff filed the action assailing
the validity of Department of Finance Regulation

ISSUE: Did the Secretary of Finance violate any right of the taxpayer when he created a presumption of liability to the tax if the
receipt fails to state a value?

RULING: Book

TAX2.9 BPI Leasing Corporation v. CA and Commissioner

FACTS: BLC paid CIR an amount representing 4% "contractor’s percentage tax" then imposed by NIRC based on its gross rentals
from equipment leasing.

Later on, the CIR issued RR 19-86 which provides that companies registered under RA 5980, such as BLC, are not liable for
"contractor’s percentage tax" are, instead, subject to "gross receipts tax" with 5%-3%-1% tax rate. BLC filed a claim for refund of
the difference it had paid with the CIR.

The CTA denied BLC’s claim of refund and held that RR 19-86, may only be applied prospectively.

BLC then appealed the case and attempts to convince the Court that Revenue Regulation 19-86 is legislative rather than
interpretative in character and hence, should retroact to the date of effectivity of the law it seeks to interpret.

ISSUE: Whether Revenue Regulation 19-86, as amended, is legislative or interpretative in nature.

RULING: Administrative issuances may be distinguished according to their nature and substance: legislative and interpretative.
A legislative rule is in the matter of subordinate legislation, designed to implement a primary legislation by providing the details
thereof. An interpretative rule, on the other hand, is designed to provide guidelines to the law which the administrative agency is
in charge of enforcing. when an administrative rule goes beyond merely providing for the means that can facilitate or render less
cumbersome the implementation of the law and substantially increases the burden of those governed, it behooves the agency to
accord at least to those directly affected a chance to be heard and, thereafter, to be duly informed, before the issuance is given the
force and effect of law.

TAX3.9 Commissioner v. Ledesma

FACTS: Respondents organized themselves into a general co-partnership. The articles of general co-partnership were registered
on July 14, 1949. Paragraph 14 of the articles of general partnership provides that the agreement shall have retroactive effect as of
January 1, 1949.

The Commissioner assessed against the partnership corporate income tax for the calendar year 1949. It is the contention of the
Commissioner that it is only from the date of the registration of the articles of general co- partnership when a co-partnership is
exempt from the payment of corporate income tax.

ISSUE: Whether or not the partnership, should pay corporate income tax as an unregistered partnership on its net income received
during the period in the year 1949 prior to the date of said registration.

HELD: Yes. Ruling No. 30 of the BIR, dated September 4, 1924, does not appear to have been revoked or even revised or
amended. The Ruling provides that xxx a commercial partnership xxx should be required to file two (2) separate returns — one
corresponding to the unregistered period and another for the period after its registration xxx

Mamalateo: See book.

TAX4.9 Begosa v. Philippine Veterans Administration

Facts: The Board of Administrators of PVA finally approved his claim to take effect on october 5 of that year. Believing that his
pension should have taken effect back in 1955 when his claim was disapproved, and that he is entitled to a higher pension as a
permanently incapacitated person, Begosa filed a case against PVA in the CFI. CFI ruled in favor plaintiff. The Board of
Administrators appealed.

Issue: Whether there was a failure of the lower court to comply with the law in fixing the amounts to which appellee is entitled
instead of following the rules and regulations on veterans’ benefits promulgated by appellants.

Ruling: No. Appellants as chairman and members of the Philippine Veterans Administration are officials of an administrative
body. The general principle is that as much as possible the courts should view with the utmost sympathy the exercise of power of
administrative tribunals whether in its rule-making or adjudicatory capacity. There is a limit, however, to such a deference paid to
the actuations of such bodies. Clearly, where there has been a failure to interpret and apply the statutory provisions in question,
judicial power should assert itself. Under the theory of separation of powers, it is to the judiciary and to the judiciary alone, that
the final say on questions of law appropriate cases coming before it is vested.chanrobles.com : virtual law library

TAX5.9 ABS-CBN Broadcasting Corp. v. CTA and Commissioner

FACTS: Section 24 (b) of the National Revenue Code (RA 2343) provides for a collection of withholding tax of 30%. It was
implemented through Circular No. V-334. Pursuant to the foregoing, ABS-CBN dutifully complied.
In 1968, RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30 % to 35 % and revising the tax basis
from “such amount” referring to rents, etc. to “gross income.” The following was implemented by Circular No. 4-71 revoking
Circular No. V-334.
On the basis of this new Circular, respondent Commissioner of Internal Revenue issued against petitioner a letter of assessment
requiring them to pay deficiency withholding income tax on the remitted film rentals for the years 1965 through 1968
Petitioner requested for a reconsideration and withdrawal of the assessment.

ISSUE: Whether or not respondent can apply General Circular No. 4-71 retroactively and issue a deficiency assessment against
petitioner.

RULING: No. Circular No. V-334 clearly states that the tax is imposed on income derived from capital and that a mere return of
capital or investment is not income. RA No. 2343, which was the basis of Circular No. V-334, was just one in a series of enactments
regarding Sec. 24 (b) of the Tax Code. RA No. 3825 came next without changing the basis. The principle of legislative approval
of administrative interpretation by re-enactment clearly obtains in this case. It provides that "the re-enactment of a statute
substantially unchanged is persuasive indication of the adoption by Congress of a prior executive construction. Note should be
taken of the fact that this case involves not a mere opinion of the Commissioner or ruling rendered on a mere query, but a Circular
formally issued to "all internal revenue officials" by the then Commissioner of Internal Revenue.
It was only on June 27, 1968 under Republic Act No. 5431, supra, which became the basis of Revenue Memorandum
Circular No. 4-71, that Sec. 24 (b) was amended to refer specifically to 35% of the "gross income."

CHAPTER XXV
ADMINISTRATIVE REMEDIES OF GOVERNMENT

TAX6.9 Republic v. Marsman Development Co.

FACTS: An investigation was conducted on the business operation and activities of the corporation leading to the discovery that
certain taxes were due from it on logs produced from its concession. Assessments of deficiency sales tax are the subject matter of
the instant case for collection.
Marsman requested an itemized statement of the said taxes. Bureau of Internal Revenue informed defendant that there are
requirements needed to be complied for requests for reinvestigation or reexamination of tax assessments. The requirements went
unheeded after several warnings.
The BIR issued "final tax notices" to the defendant corporation. The lower Court favored the BIR and ordered defendant corporation
to pay the deficiency taxes and penalties. Hence, this appeal.

ISSUE: Whether the lower court erred in declaring that the notices of the Commissioner became final and executory after the
Commissioner demanded compliance with the prerequisites of such reinvestigation

RULING: No. The assessments made by the Commissioner and his authorized agents are presumed correct. The Burden of proof
to show the incorrectness or inaccuracy of such assessments or the details thereof lies on the taxpayer. The corporation failed to
comply.
TAX9.9 Cyanamid Philippines v. CA

FACTS: CIR assessed on petitioner a deficiency income tax for the year 1981. Cyanamid protested the assessments particularly
the 25% surtax for undue accumulation of earnings. It claimed that said profits were retained to increase petitioner’s working capital
and it would be used for reasonable business needs of the company. The CIR refused to allow the cancellation of the assessments,
hence petitioner appealed to the CTA. The CTA denied the petition. It found that there was no need to set aside such retained
earnings as working capital as it had considerable liquid funds. Those corporations exempted from the accumulated earnings tax
are found under Sec. 25 of the NIRC, and that the petitioner is not among those exempted. The CA affirmed the CTA’s decision.

ISSUE: Whether or not the assessment made by the CIR was correct

RULING: Yes. In order to determine whether profits are accumulated for the reasonable needs of the business to avoid the surtax
upon the shareholders, it must be shown that the controlling intention of the taxpayer is manifested at the time of the accumulation,
not intentions subsequently, which are mere afterthoughts. Unless, rebutted, the presumption is that the assessment is correct.
With the petitioner’s failure to prove the CIR incorrect, clearly and conclusively, the Tax Court’s ruling is upheld.

TAX12.9 Interprovincial Autobus v. Co. Commissioner

FACTS: Interprovincial Autobus Co. was not able to preserve the receipt stubs from 1936 to 1938. The provincial revenue agent
ascertained the number of receipts by referring to the conductor’s daily report for the said period. But said report did not state the
value of the goods transported thereunder. Pursuant, however, to the Revised Documentary Stamp Tax Regulations of the
Department of Finance, he assumed that the value of the goods covered by each of the above- mentioned freight receipts amounted
to more than P5, and assessed a documentary stamp tax of P0.04 on each of the 194,406 receipts. The tax thus was collected from
the Plaintiff. Plaintiff demanded the refund of the amount which was refused by the defendant.

ISSUE: W/N conductors daily report are allowed to be used instead of freight tickets?

RULING: The court sustained the use of the doctrine of best evidence obtainable, where the conductors daily report were allowed
to be used instead of the freight tickets by common carrier, for the purpose of computing the documentary stamp tax thereon.

TAX14.9 Collector v. Avelino

FACTS: A corresponding assessment, made on the networth method, was based upon an investment made by Avelino in the
amount of 60K in a Corporation, organized in 1947. He having filed no income tax return for such year, said amount was considered
as his unreported income therefor. Avelino maintained that said amount had been lent to him by Sayque, another member of the
corporation. Avelino presented evidence that he is not capable of producing the 60K. And since the corporation had no profit when
it was closed, Avelino can never pay the loan extended to him.

ISSUE: whether the net worth method used by respondent in determining petitioner’s taxable income is without justifiable basis.

RULING: Where the CIR used as part of the opening net worth the small bank deposit of petitioner at the beginning of the year
1946; and the petitioner presents in Court an income tax return for the year 1946 of petitioner’s wife to show that his wife made a
gain prior to that period, and that therefore he had an opening net worth bigger than that used by the said Commissioner, but said
return does not contain any details to indicate how the alleged gain was used, invested or deposited, it is held that the lower court
was correct in considering said return as a self-serving statement and in giving no credence to the alleged existence of a bigger
opening net worth corresponding to said supposed gain of the wife.