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Sunday, February 07, 2016

Air Transportation Office vs. Spouses Ramos [GR No. 159402, February 23, 2011]

FACTS: Spouses Ramos own a parcel of land that was being used as part of the runway of Loakan Airport operated by petitioner Air Transportation Office (ATO). Spouses Ramos agreed to sell the subject land to petitioner but the latter failed to pay prompting the spouses to file a collection suit against ATO.

ISSUE: Whether ATO, an unincorporated government agency not performing a purely governmental function can be sued without its consent

RULING: Yes. An unincorporated government agency without any separate juridical personality of its own enjoys immunity from suit because it is invested with an inherent power of sovereignty. Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of sovereign immunity is violated. However, the need to distinguish between an unincorporated government agency performing governmental function and one performing proprietary functions has arisen. The immunity has been upheld in favor of the former because its function is governmental or incidental to such function; it has not been upheld in favor of the latter whose function was not in pursuit of a necessary function of government but was essentially a business. The ATO is an agency of the government not performing a purely governmental or sovereignty function, but was instead involved in the management and maintenance of the Loakan airport, an activity that was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO had no claim to the State's immunity from suit. Moreover, the doctrine of sovereign immunity cannot be successfully invoked to defeat a valid claim for compensation arising from the taking without just compensation and without the proper expropriation proceedings being first resorted to of the plaintiff's property.


Friday, February 05, 2016

Universal Robina Corporation (Corn Division) vs. Laguna Lake Development Authority (LLDA) GR No. 191427, May 30, 2011

FACTS: Laguna Lake Development Authority (LLDA), respondent, found that Universal Robina Corporation (URC) failed to comply with government standards provided under Department of Environment and Natural Resources (DENR) Administrative Orders (DAOs) Nos. 34 and 35, series of 1990. After conducting hearings, the LLDA resolved that URC is found to be discharging pollutive wastewater. Petitioner moved to reconsider, however, the LLDA denied petitioner's motion for reconsideration and reiterated its order to pay the penalties. Petitioner challenged by certiorari the orders before the Court of Appeals. The appellant court went on to chide petitioner's petition for certiorari as premature since the law provides for an appeal from decision or orders of the LLDA to the DENR Secretary or the Office of the President, a remedy which should have first been exhausted before invoking judicial intervention.

ISSUE: Whether petitioner was deprived of due process and lack of any plain, speedy or adequate remedy as grounds which exempted it from complying with the rule on exhaustion of administrative remedies

RULING: No. The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial system. The thrust of the rule is that Courts must allow administrative agencies to carry out their functions and discharge their responsibilities within the specialized areas of their respective competence. The rationale for this doctrine is obvious. It entails lesser expenses and provides for the speedier resolution of controversies. Comity and convenience also impel courts of justice to shy away from a dispute until the system of administrative redress has been completed. Petitioner had thus available remedy of appeal to the DENR Secretary. Its contrary arguments to show that an appeal to the DENR Secretary would be an exercise in futility as the latter merely adopts the LLDA's findings is at best, speculative and presumptuous.

The essence of due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain one's side, or an opportunity to seek a reconsideration of the action or ruling complained of. Administrative due process cannot be fully equated with due process in its strictest judicial sense for it is enough that the party is given the chance to be heard before the case against him is decided.

Thursday, February 04, 2016

Tambunting Pawnshop vs. CIR

FACTS: Petitioner claimed losses as deductions arising from the auction sales it conducted. To prove the same, petitioner submitted in evidence its “Rematado” book containing a record of items foreclosed and “Subasta” book containing a record of the auction sale of pawned items foreclosed. Petitioner likewise claimed the gain or loss on auction sale represents the difference between the capital (amount loaned to the pawnee, unpaid interest, and other expenses) and the price for which the pawned articles were sold.

ISSUE: Whether or not the petitioner is entitled to the losses as deductions

RULING: No. Petitioner did not properly prove its losses since the Subasta books did not reflect the true amounts of the proceeds and the Rematado books did not reflect the capital since the only amounts therein were those given to the pawnees.

The losses claimed from fire and theft were also disallowed since while certifications from the police and fire departments and a list of the properties lost were submitted, the petitioner did not submit sworn declarations describing the loss.

Wednesday, February 03, 2016

CIR vs. Filinvest Development Corporation

FACTS: Filinvest Development Corporation (FDC) extended advances in favor of its affiliates and supported the same with instructional letters and cash and journal vouchers. The Bureau of Internal Revenue (BIR) assessed Filinvest for deficiency income tax by unilaterally imputing an “arm's length” interest rate on its advances to affiliates. Filinvest dispute this by saying that the CIR lacks the authority to impute theoretical interest and that the rule is that interests cannot be demanded in the absence of stipulation to that effect.

ISSUE: Whether or not CIR can unilaterally impute theoretical interest on the advances made by Filinvest to its affiliates

RULING: No. Despite the seemingly broad power of the CIR to distribute, apportion and allocate gross income under Section 50 of the Tax Code, the same does not include the power to impute theoretical interests even with regard to controlled taxpayers' transactions. This is true even if the CIR is able to prove that interest expense (on FDC's own loans) was in fact claimed by FDC.

Tuesday, February 02, 2016

Deutsche Bank AG Manila Branch vs. CIR

FACTS: Petitioner withheld a 15% tax on its remittances to its head office in Germany using as basis the Tax Code provision on Branch Profit Remittance Tax (BPRT). Believing that it overpaid the BPRT since the RP-Germany Treaty provides for a lower rate of 10% on branch remittances, the petitioner filed a refund with the Bureau of Internal Revenue (BIR) and subsequently with the Court of Tax Appeals (CTA). Both the BIR and the CTA denied stating that the branch office should have filed a tax treaty relief application prior to availing of the preferential treaty rate in view of the existing doctrine n the Mirant case.

ISSUE: Whether or not Deutsche Bank is entitled to the claim for refund even if it did not file a tax treaty relief application with the BIR

RULING: Yes. The Court initially stated that the minute resolution upholding the doctrine in Mirant is not a binding precedent specially since there are differences in the parties, taxable period, etc. On the substantive issue, the Court said that the principle of pacta sunt servanda requires the performance in good faith of treaty obligations. Thus, to require that taxpayers must first comply with an administrative requirement (under RMO 1-2000) is not in consonance with the performance in good faith. The obligation to comply with a tax treaty must take precedence over the objectives of the said RMO. In addition, it was pointed out that the prior application becomes illogical if the premise of the claim was an erroneous payment since the taxpayer could not have known it would be entitled to the refund since precisely it was using a different basis when it paid the taxes due.

Monday, February 01, 2016

Asia International Auctioneers, Inc. vs. Commissioner of Internal Revenue (CIR)

ISSUE: Whether or not a deficiency VAT assessment is tantamount to an assessment for withholding tax liabilities such that the taxpayer cannot avail of a tax amnesty program

RULING: No. The CIR did not assess AIA as a withholding agent that failed to withhold or remit the deficiency VAT and excise tax to the BIR under relevant provisions of the Tax Code. Hence, the argument that AIA is deemed a withholding agent for these deficiency taxes is fallacious. Indirect taxes, like VAT and excise tax, are different from withholding taxes. To distinguish, in indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted or passed on to another person, such as when the tax is imposed upon goods before reaching the consumer who ultimately pays for it. On the other hand, in case of withholding taxes, the incidence and burden of taxation fall on the same entity, the statutory taxpayer. The burden of taxation is not shifted to the withholding agent who merely collects, by withholding, the tax due from income payments to entities arising from certain transaction and remits the same to the government.

In Re: Benjamin M. Dacanay (Petition for Leave to Resume Practice of Law), 540 SCRA 424, 2007

ISSUE: Whether or not petitioner's reacquisition of Philippine citizenship pursuant to RA No. 9225 (Citizenship Retention and Re-Acquisition Act of 2003) automatically restore the privilege to practice law

RULING: No. A Filipino lawyer who becomes a citizen of another country is deemed never to have lost his Philippine citizenship if he reacquires it in accordance with RA 9225. Nevertheless, although he is also deemed never to have terminated his membership in the Philippine bar, no automatic right to resume law practice accrues. Before he can resume his law practice, he must first secure from the Court authority to do so, conditioned on: 1) the updating and payment in full of the annual membership dues in the IBP; 2) the payment of professional tax; 3) the completion of at least 36 credit hours of mandatory continuing legal education; this is especially significant to refresh the applicant/petitioner's knowledge of Philippine laws and update him of legal developments and 4) the retaking of the lawyer's oath which will not only remind him of his duties and responsibilities as lawyer and as an officer of the Court, but also renew his pledge to maintain allegiance to the Republic of the Philippines.

CIR vs. Pilipinas Shell Petroleum Corporation

FACTS: Shell filed a claim for refund for excise taxes it paid on sales of gas and fuel oils to various international carriers. The Court initially denied the claims but the respondent filed a Motion for Reconsideration.

ISSUE: Whether or not Shell is entitled to refund for payment of the excise taxes

RULING: Yes. Section 135 is concerned with the exemption of the article itself and not the ostensible exemption of the international carrier-buyer. In addition, the failure to grant exemption will cause adverse impact on the domestic oil industry (similar to the practice of “tankering”) as well as result to violations of international agreements on aviation. Thus, respondent, as the statutory taxpayer who is directly liable to pay the excise tax, is entitled to a refund or credit for taxes paid on products sold to international carriers.

Friday, January 29, 2016

CIR vs. SMART Communications, Inc.

FACTS: SMART entered into an agreement with Prism, a non-resident foreign corporation domiciled in Malaysia, whereby Prism will provide programming and consultancy services to SMART. Thinking that the payments to Prism were royalties, SMART withheld 25% under the RP-Malaysia Tax Treaty. SMART then filed a refund with the BIR alleging that the payments were not subject to Philippine withholding taxes given that they constituted business profits paid to an entity without a permanent establishment in the Philippines.

ISSUE: Whether or not SMART has the right to file a claim for refund

RULING: Yes. The Court reiterated the ruling in Procter & Gamble stating that a person “liable for tax” has sufficient legal interest to bring a suit for refund of taxes he believes were illegally collected from him. Since the withholding agent is an agent of the beneficial owner of the payments (i.e., non-resident), the authority as agent is held to include the filing of a claim for refund. SMART was granted a refund given that only a portion of its payments represented royalties since it is only that portion over which Prism maintained intellectual property rights and the rest involved full transfer of proprietary rights to SMART and were thus treated as business profits of Prism.

Dumaguete Cathedral Credit Cooperative vs. CIR

FACTS: Petitioner was assessed for deficiency withholding taxes on interest from savings and time deposits of its members. The CTA ruled against the petitioner and said that the withholding of tax on income payments subject to final withholding tax includes the said interest as “interest from xxx similar arrangement...”

ISSUE: Whether or not petitioner is liable for the deficiency withholding tax

RULING: No. The BIR had earlier ruled without any qualification that since interest from any Philippine currency bank deposit and yield or any other monetary benefit from deposit substitutes are paid by banks, other entities such as cooperatives are not required to withhold the corresponding tax on the interest from savings and time deposits of their members. The fact that “similar arrangements” is preceded by banking terms means that those subject to withholding must have deposit peculiarities. This is also consistent with the preferential treatment accorded to members of cooperatives who are exempt in the same way as the cooperatives themselves.

Thursday, January 28, 2016

CIR vs. St. Luke's Medical Center, Inc.

FACTS: St. Luke's is a non-stock non-profit hospital. The BIR assessed St. Luke's based on the argument that Section 27(B) of the Tax Code should apply to it and hence all of St. Luke's income should be subject to the 10% tax therein as it is a more specific provision and should prevail over Section 30 which is a general provision. St. Luke's countered by saying that its free services to patients was 65% of its operating income and that no part of its income inures to the benefit of any individual.

ISSUE: Does Section 27(B) have the effect of taking proprietary non-profit hospitals out of the income tax exemption under Section 30 of the Tax Code and should instead be subject to a preferential rate of 10% on its entire income?

RULING: No. The enactment of Section 27(B) does not remove the possible income tax exemption of proprietary non-profit hospitals. The only thing that Section 27(B) captures (at 10% tax) in the case of qualified hospitals is in the instance where the income realized by the hospital falls under the last paragraph of Section 30 such as when the entity conducts any activity for profit. The revenues derived by St. Luke's from pay patients are clearly income from activities conducted for profit.