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FIRST DIVISION

G.R. No. L-31364 March 30, 1979

MISAEL P. VERA, as Commissio!r o" I#!ra$ R!%!&!,a' (AIME ARANE)A, as R!*ioa$ +ir!c#or, R!%!&!R!*io No. 14, &r!a& o" I#!ra$ R!%!&!, petitioners,vs.N. (SE /. /ERNAN+E, (&'*! o" #h! Co&r# o" /irs#Is#ac! o" N!*ros cci'!#a$, rach V, a' /RANCISA. )NG, A'miis#ra#or o" #h! Es#a#! o" #h! $a#! L2IS

+. )NG respondents.

+E CAS)R,J.:

Appeal from two orders of the Court of First Instane of Ne!rosOidental, "ranh V in Speial #roeedin!s No. $$%&,entitled' (Intestate )state of *uis D. Ton!o+,( the rst dated

-ul+ %, /%0% dismissin! the 1otion for Allowane of Claimand for an Order of #a+ment of Ta2es 3+ the 4overnment ofthe Repu3li of the #hilippines a!ainst the )state of the late*uis D. Ton!o+, for deien+ inome ta2es for the +ears /%05and /%0& of the deedent in the total amount of #5,6&.78,inlusive 69 surhar!e, /9 monthl+ interest and ompromise

penalties, and the seond, dated Oto3er $, /%0%, den+in!the 1otion for reonsideration of the Order of dismissal.

The 1otion for allowane of laim and for pa+ment of ta2esdated 1a+ 7, /%0% was led on -une 5, /%0% in thea3ovementioned speial proeedin!s, :par. 5, Anne2 A,#etition, pp. /%8, Rollo;. The laim represents theinde3tedness to the 4overnment of the late *uis D. Ton!o+ fordeien+ inome ta2es in the total sum of #5,6&.78 asa3ove stated, overed 3+ Assessment Noties Nos. //


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a3ilit+ to serve the people for whose 3enet ta2es areolleted. To safe!uard suh interest, ne!let or omission of!overnment oials entrusted with the olletion of ta2esshould not 3e allowed to 3rin! harm or detriment to thepeople, in the same manner as private persons ma+ 3e madeto suer individuall+ on aount of his own ne!li!ene, thepresumption 3ein! that the+ ta?e !ood are of their personalaairs. This should not hold true to !overnment oials withrespet to matters not of their own personal onern. This isthe philosoph+ 3ehind the !overnmentGs e2eption, as a!eneral rule, from the operation of the priniple of estoppel.:Repu3li vs. Ca3allero, *


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"oth noties of assessment ontained the followin! note'

#lease 3e informed that +our Mperenta!e and doumentar+stamp ta2es have 3een assessed as shown a3ove. Saidassessment has 3een 3ased on return L :led 3+ +ou; L :asveried; L :made 3+ this Oe; L :pendin! investi!ation; L:after investi!ation;. ou are reuested to pa+ the a3oveamount to this Oe or to our Colletion A!ent in the Oe ofthe Cit+ or Deput+ #rovinial Treasurer of 2220

In a letter dated Deem3er /8, /%77, "#I, throu!h ounsel,

replied as follows'

/. our (deien+ assessments( are no assessmentsat all. The ta2pa+er is not informed, even in theva!uest terms, wh+ it is 3ein! assessed a deien+.

The ver+ purpose of a deien+ assessment is toinform ta2pa+er wh+ he has inurred a deien+ sothat he an ma?e an intelli!ent deision on whetherto pa+ or to protest the assessment. This is all themore so when the assessment involves astronomialamounts, as in this ase.

Be therefore reuest that the e2aminer onerned3e reuired to state, even in the 3riefest form, wh+he 3elieves the ta2pa+er has a deien+

doumentar+ and perenta!e ta2es, and as to theperenta!e ta2, it is important that the ta2pa+er 3einformed also as to what partiular perenta!e ta2the assessment refers to.

. As to the alle!ed deien+ doumentar+ stampta2, +ou are aware of the ompromise for!ed3etween +our oe and the "an?ers Assoiation ofthe #hilippines M"A# on this issue and of "#IKssu3mission of its omputations under thisompromise. There is therefore no 3asis whatsoeverfor this assessment, assumin! it is on the su3@et ofthe "A# ompromise. On the other hand, if it relatesto doumentar+ stamp ta2 on some other issue, weshould li?e to 3e informed a3out what those issuesare.

5. As to the alle!ed deien+ perenta!e ta2, weare ompletel+ at a loss on how suh assessmentma+ 3e protested sine +our letter does not even tellthe ta2pa+er what partiular perenta!e ta2 isinvolved and how +our e2aminer arrived at thedeien+. As soon as this is e2plained and lariedin a proper letter of assessment, we shall inform +ouof the ta2pa+erKs deision on whether to pa+ orprotest the assessment.$

On -une $, /%%/, "#I reeived a letter from CIR dated 1a+ 7,/%%/ statin! that'

P althou!h in all respets, +our letter failed to ualif+ as a

protest under Revenue Re!ulations No. /e ontends that there was no law or @urisprudene then thatreuired noties to state the reasons for assessin! deien+ta2 lia3ilities.

"#I ounters that due proess demanded that the fats, dataand law upon whih the assessments were 3ased 3e providedto the ta2pa+er. It insists that the NIRC, as worded now:referrin! to Setion 7;, speiall+ provides that'

Ta2 *aw Fullte2t :/stset; H 5
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(Mthe ta2pa+er shall 3e informed in writin! of the law and thefats on whih the assessment is made otherwise, theassessment shall 3e void.(

Aordin! to "#I, this is delarator+ of what sound ta2proedure is and a onrmation of what due proess reuireseven under the former Setion $8.

"#IKs ontention has no merit. The present Setion 7 of theNIRC provides'

Se. 7. #rotestin! of Assessment. Q h! #h! 8CIR orhis '&$: ahori;!' r!r!s!#a#i%! ! ass!ss!', h! sha$$ ! %oi'.

222 222 222 :emphasis supplied;

Admittedl+, the CIR did not inform "#I in writin! of the law andfats on whih the assessments of the deien+ ta2es weremade. >e merel+ notied "#I of his ndin!s, onsistin! onl+ ofthe omputation of the ta2 lia3ilities and a demand forpa+ment thereof within 58 da+s after reeipt.

In merel+ notif+in! "#I of his ndin!s, the CIR relied on theprovisions of the former Setion $8 prior to its amendment3+ RA 7&& :also ?nown as the Ta2 Reform At of /%%$;.5InCIR v. Reyes,&we held that'

In the present ase, Re+es was not informed in writin! of thelaw and the fats on whih the assessment of estate ta2eshad 3een made. She was merel+ notied of the ndin!s 3+

the CIR, who had simpl+ relied upon the provisions of formerSetion % prior to its amendment 3+ MRA 7&&, otherwise?nown as the Ta2 Reform At of /%%$.

First, RA 7&& has alread+ amended the provision of Setion% on protestin! an assessment. )h! o$' r!&ir!m!# o"merelyo#i":i* #h! #a=a:!r o" #h! CIRDs e testied to the fat that he prepared wor?sheetswhih ontain his anal+sis re!ardin! the ndin!s of the MCIRKse2aminer, 1r. San #edro and that the same wor?sheets werepresented to 1r. Carlos Tan, Comptroller of M"#I.

222 222 222

Ta2 *aw Fullte2t :/stset; H &
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From all the fore!oin! disussions, Be an now onlude thatM"#I was indeed aware of the nature and 3asis of theassessments, and was !iven all the opportunit+ to ontest thesame 3ut i!nored it despite the notie onspiuousl+ writtenon the assessments whih states that (this ASS)SS1)NT3eomes nal and unappeala3le if not protested within 58da+s after reeipt.( Counsel resorted to dilator+ tatis anddan!erousl+ pla+ed with time. Enfortunatel+, suh strate!+proved fatal to the ause of his lient.55

The CA never disputed these ndin!s of fat 3+ the CTA'

MThis Court reo!ni=es that the MCTA, whih 3+ the ver+nature of its funtion is dediated e2lusivel+ to theonsideration of ta2 pro3lems, has neessaril+ developed ane2pertise on the su3@et, and its onlusions will not 3eoverturned unless there has 3een an a3use or improvidente2erise of authorit+. Suh ndin!s an onl+ 3e distur3ed onappeal if the+ are not supported 3+ su3stantial evidene orthere is a showin! of !ross error or a3use on the part of theMCTA.5&

Ender the former Setion $8, there were two instanes whenan assessment 3eame nal and unappeala3le' :/; when itwas not protested within 58 da+s from reeipt and :; whenthe adverse deision on the protest was not appealed to theCTA within 58 da+s from reeipt of the nal deision'56

Se. $8. #rotestin! of assessment.(a*+p#i(.net

222 222 222

Suh assessment ma+ 3e protested administrativel+ 3+ lin!a reuest for reonsideration or reinvesti!ation in suh formand manner as ma+ 3e presri3ed 3+ the implementin!re!ulations within thirt+ :58; da+s from reeipt of theassessment otherwise, the assessment shall 3eome naland unappeala3le.

If the protest is denied in whole or in part, the individual,assoiation or orporation adversel+ aeted 3+ the deision

on the protest ma+ appeal to the MCTA within thirt+ :58; da+sfrom reeipt of the said deision otherwise, the deision shall3eome nal, e2eutor+ and demanda3le.

Im$ica#ios " A Va$i' Ass!ssm!#

Considerin! that the Oto3er 7, /%77 noties were validassessments, "#I should have protested the same within 58da+s from reeipt thereof. The Deem3er /8, /%77 repl+ itsent to the CIR did not ualif+ as a protest sine the letteritself stated that (Mas soon as this is e2plained and laried ina proper letter of assessment, ! sha$$ i"orm :o& o" #h!#a=a:!rFs '!cisio o h!#h!r #o a: or ro#!s# #h!ass!ssm!#.(50>ene, 3+ its own delaration, "#I did notre!ard this letter as a protest a!ainst the assessments. As amatter of fat, "#I never deemed this a protest sine it did noteven onsider the Oto3er 7, /%77 noties as valid or properassessments.

The inevita3le onlusion is that "#IKs failure to protest theassessments within the 58$! #o #a! r!co&rs! #o #h!#a= co&r# a# #h! oor#&! #im!. i#ho !!'$!ss'ic&$#:, #h! #a=a:!r o&$' >! a>$! #o '!#!rmi!h! his ri*h# #o a!a$ #o #h! #a= co&r# accr&!s.

)h! r&$! o" co'&c# o&$' a$so o>%ia#! a$$ '!sir! a'oor#&i#: o #h! ar# o" #h! #a=a:!r #o co#i&a$$:'!$a: #h!


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S R+ERE+.

)N "ANC

G.R. No. L-734 S!#!m>!r 1, 1967

CMMISSINER / IN)ERNAL REVEN2E,petitioner,vs.MAN2EL . PINE+A, as o! o" #h! h!irs o" '!c!as!'

A)ANASI PINE+A,respondent.

-ce of t#e /olicitor 0eneral for petitioner.1anuel 2. Pineda for and in #is o"n be#alf as respondent.

ENGN, (.P.,J.:

On 1a+ 5, /%&6 Atanasio #ineda died, survived 3+ his wife,Feliisima"a!tas, and /6 hildren, the eldest of whom is1anuel ". #ineda, a law+er. )state proeedin!s were had inthe Court of First Instane of 1anila :Case No. $//%; whereinthe survivin! widow was appointed administratri2. The estatewas divided amon! and awarded to the heirs and theproeedin!s terminated on -une 7, /%&7. 1anuel ". #inedaGsshare amounted to a3out #,688.88.

After the estate proeedin!s were losed, the "ureau ofInternal Revenue investi!ated the inome ta2 lia3ilit+ of theestate for the +ears /%&6, /%&0, /%&$ and /%&7 and it foundthat the orrespondin! inome ta2 returns were not led.

Thereupon, the representative of the Colletor of InternalRevenue led said returns for the estate on the 3asis ofinformation and data o3tained from the aforesaid estateproeedin!s and issued an assessment for the followin!'

/. Deien+ inome ta2

/%&6

#/56.75

/%&0

&50.%6

/%&$

/,80.%/ #/,$$%.0%

Add' 69 surhar!e 77.%7

/9 monthl+ interest fromNovem3er 58, /%65 to April /6,/%6$ $8.$$

Compromise for late lin! 78.88

Compromise for late pa+ment &8.88

Total amount due#,$8$.&&

. Additional residene ta2 for /%&6

#/&.68

5. Real )state dealerGs ta2 for the fourthuarter of /%&0 and the whole +ear of/%&$

#8$.68

1anuel ". #ineda, who reeived the assessment, ontestedthe same. Su3seuentl+, he appealed to the Court of Ta2Appeals alle!in! that he was appealin! (onl+ thatproportionate part or portion pertainin! to him as one of theheirs.(

After hearin! the parties, the Court of Ta2 Appeals rendered@ud!ment reversin! the deision of the Commissioner on the

!round that his ri!ht to assess and ollet the ta2 haspresri3ed. The Commissioner appealed and this Courtarmed the ndin!s of the Ta2 Court in respet to theassessment for inome ta2 for the +ear /%&$ 3ut held that theri!ht to assess and ollet the ta2es for /%&6 and /%&0 hasnot presri3ed. For /%&6 and /%&0 the returns were led onAu!ust &, /%65 assessments for 3oth ta2a3le +ears weremade within ve +ears therefrom or on Oto3er /%, /%65 andthe ation to ollet the ta2 was led within ve +ears fromthe latter date, on Au!ust $, /%6$. For ta2a3le +ear /%&$,however, the return was led on 1arh /, /%&7 theassessment was made on Oto3er /%, /%65, more than ve

+ears from the date the return was led hene, the ri!ht toassess inome ta2 for /%&$ had presri3ed. Aordin!l+, Beremanded the ase to the Ta2 Court for further appropriateproeedin!s./

In the Ta2 Court, the parties su3mitted the ase for deisionwithout additional evidene.

On Novem3er %, /%05 the Court of Ta2 Appeals rendered@ud!ment holdin! 1anuel ". #ineda lia3le for the pa+mentorrespondin! to his share of the followin! ta2es'

Deien+ inome ta2

/%&6 #/56.75

/%&0 &50.%6

Real estate dealerGs 2edta2 &th uarter of /%&0 andwhole +ear of /%&$

#/7$.68

The Commissioner of Internal Revenue has appealed to Esand has proposed to hold 1anuel ". #ineda lia3le for thepa+ment of all the ta2es found 3+ the Ta2 Court to 3e duefrom the estate in the total amount of #$08.7 instead of onl+for the amount of ta2es orrespondin! to his share in theestate.(a"p#3l.n4t

1anuel ". #ineda opposes the proposition on the !round that

as an heir he is lia3le for unpaid inome ta2 due the estateonl+ up to the e2tent of and in proportion to an+ share hereeived. >e relies on 0overnment of t#e P#ilippine Islands v.Pamintuanwhere Be held that (after the partition of anestate, heirs and distri3utees are lia3le individuall+ for thepa+ment of all lawful outstandin! laims a!ainst the estate inproportion to the amount or value of the propert+ the+ haverespetivel+ reeived from the estate.(

Be hold that the 4overnment an reuire 1anuel ". #ineda topa+ the full amount of the ta2es assessed.

#ineda is lia3le for the assessment as an heir and as a holderis lia3ilit+, however, annot e2eed the amountof his share.&

As a holder of propert+ 3elon!in! to the estate, #ineda islia3le for he ta2 up to the amount of the propert+ in hispossession. The reason is that the 4overnment has a lien onthe #,688.88 reeived 3+ him from the estate as his share inthe inheritane, for unpaid inome ta2es&afor whih saidestate is lia3le, pursuant to the last para!raph of Setion 5/6of the Ta2 Code, whih we uote hereunder'

If an+ person, orporation, partnership, @oint


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refuses to pa+ the same after demand, the amountshall 3e a lien in favor of the 4overnment of the#hilippines from the time when the assessment wasmade 3+ the Commissioner of Internal Revenue untilpaid with interest, penalties, and osts that ma+arue in addition thereto upon all propert+ andri!hts to propert+ 3elon!in! to the ta2pa+er' . . .

"+ virtue of suh lien, the 4overnment has the ri!ht to su3@etthe propert+ in #inedaGs possession, i.e., the #,688.88, tosatisf+ the inome ta2 assessment in the sum of #$08.7.After suh pa+ment, #ineda will have a ri!ht of ontri3utionfrom his o)R)FOR), the deision appealed from is modied. 1anuel". #ineda is here3+ ordered to pa+ to the Commissioner ofInternal Revenue the sum of #$08.7 as deien+ inome ta2for /%&6 and /%&0, and real estate dealerGs 2ed ta2 for thefourth uarter of /%&0 and for the whole +ear /%&$, withoutpre@udie to his ri!ht of ontri3ution for his or&ar: 17, 19??

CMMISSINER / IN)ERNAL REVEN2E, petitioner,vs.ALG2E, INC., a' )E C2R) / )AJAPPEALS, respondents.

CR2,J.:

Ta2es are the life3lood of the !overnment and so should 3eolleted without unneessar+ hindrane On the other hand,suh olletion should 3e made in aordane with law as an+

ar3itrariness will ne!ate the ver+ reason for !overnment itselfIt is therefore neessar+ to reonile the apparentl+ onUitin!interests of the authorities and the ta2pa+ers so that the realpurpose of ta2ation, whih is the promotion of the ommon!ood, ma+ 3e ahieved.

The main issue in this ase is whether or not the Colletor ofInternal Revenue orretl+ disallowed the #$6,888.88dedution laimed 3+ private respondent Al!ue as le!itimate3usiness e2penses in its inome ta2 returns. The orollar+issue is whether or not the appeal of the private respondentfrom the deision of the Colletor of Internal Revenue wasmade on time and in aordane with law.

Be deal rst with the proedural uestion.

The reord shows that on -anuar+ /&, /%06, the privaterespondent, a domesti orporation en!a!ed in en!ineerin!,onstrution and other allied ativities, reeived a letter fromthe petitioner assessin! it in the total amount of #75,/75.76as delinuen+ inome ta2es for the +ears /%67 and/%6%.1On -anuar+ /7, /%06, Al!ue Uied a letter of protest orreuest for reonsideration, whih letter was stamp reeivedon the same da+ in the oe of the petitioner. On 1arh /,/%06, a warrant of distraint and lev+ was presented to theprivate respondent, throu!h its ounsel, Att+. Al3erto 4uevara

-r., who refused to reeive it on the !round of the pendin!

protest. 3A searh of the protest in the do?ets of the aseproved fruitless. Att+. 4uevara produed his le op+ and!ave a photostat to "IR a!ent Ramon Re+es, who deferredservie of the warrant. 4On April $, /%06, Att+. 4uevara wasnall+ informed that the "IR was not ta?in! an+ ation on theprotest and it was onl+ then that he aepted the warrant ofdistraint and lev+ earlier sou!ht to 3e served. Si2teen da+slater, on April 5, /%06, Al!ue led a petition for review of thedeision of the Commissioner of Internal Revenue with theCourt of Ta2 Appeals.6

The a3ove hronolo!+ shows that the petition was ledseasona3l+. Aordin! to Rep. At No. //6, the appeal ma+3e made within thirt+ da+s after reeipt of the deision orrulin! hallen!ed.7It is true that as a rule the warrant ofdistraint and lev+ is (proof of the nalit+ of theassessment( ?and renders hopeless a reuest forreonsideration,( 93ein! (tantamount to an outri!ht denialthereof and ma?es the said reuest deemed re@eted.( 10"utthere is a speial irumstane in the ase at 3ar thatprevents appliation of this aepted dotrine.

The proven fat is that four da+s after the private respondentreeived the petitionerGs notie of assessment, it led its letterof protest. This was apparentl+ not ta?en into aount 3eforethe warrant of distraint and lev+ was issued indeed, suhprotest ould not 3e loated in the oe of the petitioner. Itwas onl+ after Att+. 4uevara !ave the "IR a op+ of theprotest that it was, if at all, onsidered 3+ the ta2 authorities.Durin! the intervenin! period, the warrant was premature andould therefore not 3e served.

As the Court of Ta2 Appeals orretl+ noted,( 11the protestled 3+ private respondent was notpro formaand was 3asedon stron! le!al onsiderations. It thus had the eet ofsuspendin! on -anuar+ /7, /%06, when it was led, there!lementar+ period whih started on the date theassessment was reeived, vi=., -anuar+ /&, /%06. The periodstarted runnin! a!ain onl+ on April $, /%06, when the privaterespondent was denitel+ informed of the implied re@etion ofthe said protest and the warrant was nall+ served on it.>ene, when the appeal was led on April 5, /%06, onl+ 8da+s of the re!lementar+ period had 3een onsumed.

Now for the su3stantive uestion.

Ta2 *aw Fullte2t :/stset; H $


8/22

The petitioner ontends that the laimed dedution of#$6,888.88 was properl+ disallowed 3eause it was not anordinar+ reasona3le or neessar+ 3usiness e2pense. The Courtof Ta2 Appeals had seen it dierentl+. A!reein! with Al!ue, itheld that the said amount had 3een le!itimatel+ paid 3+ theprivate respondent for atual servies rendered. The pa+mentwas in the form of promotional fees. These were olleted 3+the #a+ees for their wor? in the reation of the Ve!eta3le OilInvestment Corporation of the #hilippines and its su3seuentpurhase of the properties of the #hilippine Su!ar )stateDevelopment Compan+.

#arenthetiall+, it ma+ 3e o3served that the petitioner hadOri!inall+ laimed these promotional fees to 3e personalholdin! ompan+ inome 13ut later onformed to thedeision of the respondent ourt re@etin! this assertion.13Infat, as the said ourt found, the amount was earned throu!hthe @oint eorts of the persons amon! whom it was distri3utedIt has 3een esta3lished that the #hilippine Su!ar )stateDevelopment Compan+ had earlier appointed Al!ue as itsa!ent, authori=in! it to sell its land, fatories and oilmanufaturin! proess. #ursuant to suh authorit+, Al3erto4uevara, -r., )duardo 4uevara, Isa3el 4uevara, )dith, OGFarell,and #a3lo Sanhe=, wor?ed for the formation of the Ve!eta3leOil Investment Corporation, induin! other persons to investin it.14Eltimatel+, after its inorporation lar!el+ throu!h thepromotion of the said persons, this new orporation purhasedthe #S)DC properties.1For this sale, Al!ue reeived as a!ent

a ommission of #/0,888.88, and it was from thisommission that the #$6,888.88 promotional fees were paidto the aforenamed individuals.16

There is no dispute that the pa+ees dul+ reported theirrespetive shares of the fees in their inome ta2 returns andpaid the orrespondin! ta2es thereon.17The Court of Ta2Appeals also found, after e2aminin! the evidene, that nodistri3ution of dividends was involved.1?

The petitioner laims that these pa+ments are titious3eause most of the pa+ees are mem3ers of the same famil+in ontrol of Al!ue. It is ar!ued that no indiation was made asto how suh pa+ments were made, whether 3+ he? or inash, and there is not enou!h su3stantiation of suh

pa+ments. In short, the petitioner su!!ests a ta2 dod!e, anattempt to evade a le!itimate assessment 3+ involvin! anima!inar+ dedution.

Be nd that these suspiions were adeuatel+ met 3+ theprivate respondent when its #resident, Al3erto 4uevara, andthe aountant, Ceilia V. de -esus, testied that the pa+mentswere not made in one lump sum 3ut periodiall+ and indierent amounts as eah pa+eeGs need arose. 19It should 3eremem3ered that this was a famil+ orporation where strit3usiness proedures were not applied and immediateissuane of reeipts was not reuired. )ven so, at the end ofthe +ear, when the 3oo?s were to 3e losed, eah pa+eemade an aountin! of all of the fees reeived 3+ him or her,to ma?e up the total of #$6,888.88. 0Admittedl+, ever+thin!seemed to 3e informal. This arran!ement was

understanda3le, however, in view of the lose relationshipamon! the persons in the famil+ orporation.

Be a!ree with the respondent ourt that the amount of thepromotional fees was not e2essive. The total ommissionpaid 3+ the #hilippine Su!ar )state Development Co. to theprivate respondent was #/6,888.88. 1After dedutin! thesaid fees, Al!ue still had a 3alane of #68,888.88 as learprot from the transation. The amount of #$6,888.88 was089 of the total ommission. This was a reasona3leproportion, onsiderin! that it was the pa+ees who didpratiall+ ever+thin!, from the formation of the Ve!eta3le OilInvestment Corporation to the atual purhase 3+ it of theSu!ar )state properties. This ndin! of the respondent ourtis in aord with the followin! provision of the Ta2 Code'

S)C. 58. 5eductions from gross income.


9/22

must ontri3ute his share in the runnin! of the !overnment.The !overnment for its part, is e2peted to respond in theform of tan!i3le and intan!i3le 3enets intended to improvethe lives of the people and enhane their moral and materialvalues. This s+m3ioti relationship is the rationale of ta2ationand should dispel the erroneous notion that it is an ar3itrar+method of e2ation 3+ those in the seat of power.

"ut even as we onede the inevita3ilit+ and indispensa3ilit+of ta2ation, it is a reuirement in all demorati re!imes thatit 3e e2erised reasona3l+ and in aordane with thepresri3ed proedure. If it is not, then the ta2pa+er has a ri!htto omplain and the ourts will then ome to his suor. For allthe awesome power of the ta2 olletor, he ma+ still 3estopped in his tra?s if the ta2pa+er an demonstrate, as ithas here, that the law has not 3een o3served.

Be hold that the appeal of the private respondent from thedeision of the petitioner was led on time with therespondent ourt in aordane with Rep. At No. //6. Andwe also nd that the laimed dedution 3+ the privaterespondent was permitted under the Internal Revenue Codeand should therefore not have 3een disallowed 3+ thepetitioner.

ACCORDIN4*, the appealed deision of the Court of Ta2Appeals is AFFIR1)D in toto,without osts.

SO ORD)R)D.

FIRST DIVISION

G.R. No. 14043 c#o>!r 14, 199?

CMMISSINER / IN)ERNAL REVEN2E, petitioner,vs.C2R) / APPEALS, C2R) / )AJ APPEALS a'

2NG MENDS CRIS)IAN ASSCIA)IN / )EPILIPPINES, INC., respondents.

PANGANIAN,J.:

Is the inome derived from rentals of real propert+ owned 3+the oun! 1enGs Christian Assoiation of the #hilippines, In.:1CA; Q esta3lished as (a welfare, eduational andharita3le non


10/22

Considerin! our ndin!s that Mprivaterespondent was not en!a!ed in the3usiness of operatin! or ontratin! Mapar?in! lot, we nd no le!al 3asis also forthe imposition of Ma deien+ 2ed ta2 andMa ontratorGs ta2 in the amountMs of#565./6 and #5,/%.$5, respetivel+.

222 222 222

B>)R)FOR), in view of all the fore!oin!,

the followin! assessments are here3+dismissed for la? of merit'

/%78 Deien+ Fi2ed Ta2 Q #565,/6

/%78 Deien+ ContratorGs Ta2 Q#5,/%.5

/%78 Deien+ Inome Ta2 Q #5$,6$7.8.

Bhile the followin! assessments are here3+ sustained'

/%78 Deien+ )2panded Bithholdin! Ta2Q #/,$%7.%5

/%78 Deien+ Bithholdin! Ta2 on Ba!esQ #55,867.7

plus /89 surhar!e and 89 interest perannum from -ul+ , /%7& until full+ paid 3utnot to e2eed three :5; +ears pursuant toSetion 6/:e;:; :5; of the NationalInternal Revenue Code eetive as of /%7&.

Dissatised with the CTA rulin!, the CIR elevated the ase tothe Court of Appeals :CA;. In its Deision of Fe3ruar+ /0,/%%&, the CA6initiall+ deided in favor of the CIR anddisposed of the appeal in the followin! manner'

Followin! the rulin! in the afore)R)FOR), the appealed deision ishere3+ R)V)RS)D in so far as it dismissedthe assessment for'

/%78 Deien+ InomeTa2 # 565./6

/%78 Deien+ContratorGs Ta2 #5,/%.5,

/%78 Deien+ InomeTa2 # 5$,6$7.8

3ut the same is AFFIR1)D in all other respet. 7

A!!rieved, the 1CA as?ed for reonsideration 3ased on thefollowin! !rounds'

I

The ndin!s of fats of the #u3liRespondent Court of Ta2 Appeals 3ein!supported 3+ su3stantial evidene Mare naand onlusive.

II

The onlusions of law of Mpu3liMrespondent e2emptin! MprivateMrespondent from the inome on rentals ofsmall shops and par?in! fees Mare in aordwith the applia3le law and @urisprudene. ?

Findin! merit in the 1otion for Reonsideration led 3+ the1CA, the CA reversed itself and promul!ated on Septem3er7, /%%6 its rst assailed Resolution whih, in part, reads'

The Court annot depart from the CTAGs

ndin!s of fat, as the+ are supported 3+evidene 3e+ond what is onsidered assu3stantial.

222 222 222

The seond !round raised is that therespondent CTA did not err in sa+in! thatthe rental from small shops and par?in! feesdo not result in the loss of the e2emption.Not even the petitioner would ha=ard thesu!!estion that 1CA is desi!ned for prot.Conseuentl+, the little inome from smallshops and par?in! fees helpMs to ?eep itshead a3ove the water, so to spea?, and

allow it to ontinue with its lauda3le wor?.

The Court, therefore, nds the seond!round of the motion to 3e meritorious andin aord with law and @urisprudene.

B>)R)FOR), the motion for reonsiderationis 4RANT)D the respondent CTAGs deisionis AFFIR1)Din toto.9

The internal revenue ommissionerGs own 1otion forReonsideration was denied 3+ Respondent Court in itsseond assailed Resolution of Fe3ruar+ %, /%%0. >ene, thispetition for review under Rule &6 of the Rules of Court. 10

T#e Issues

"efore us, petitioner imputes to the Court of Appeals thefollowin! errors'

I

In holdin! that it had departed from thendin!s of fat of Respondent Court of Ta2Appeals when it rendered its Deision datedFe3ruar+ /0, /%%& and

II

Ta2 *aw Fullte2t :/stset; H /8


11/22

In armin! the onlusion of RespondentCourt of Ta2 Appeals that the inome ofprivate respondent from rentals of smallshops and par?in! fees Mis e2empt fromta2ation. 11

T#is Court7s Ruling

The petition is meritorious.

First Issue8Factual Findings of t#e CT

#rivate respondent ontends that the Fe3ruar+ /0, /%%& CADeision reversed the fatual ndin!s of the CTA. On the otherhand, petitioner ar!ues that the CA merel+ reversed the(rulingof the CTA that the leasin! of private respondentGsfailities to small shop owners, to restaurant and anteenoperators and the operation of par?in! lots are reasona3l+inidental to and reasona3l+ neessar+ for theaomplishment of the o3@etives of the private respondentand that the inome derived therefrom are ta2 e2empt.( 1#etitioner insists that what the appellate ourt reversed wasthe le!al onlusion,not t#e factual $nding, of the CTA. 13Theommissioner has a point.

Indeed, it is a 3asi rule in ta2ation that the fatual ndin!s ofthe CTA, when supported 3+ su3stantial evidene, will 3edistur3ed on appeal unless it is shown that the said ourtommitted !ross error in the appreiation of fats. 14In thepresent ase, this Court nds that the Fe3ruar+ /0, /%%&Deision of the CA did not deviate from this rule. The lattermerel+ applied the law to the fats as found 3+ the CTA andruled on the issue raised 3+ the CIR' (Bhether or not theolletion or earnin!s of rental inome from the lease ofertain premises and inome earned from par?in! fees shallfall under the last para!raph of Setion $ of the NationalInternal Revenue Code of /%$$, as amended.( 1

Clearl+, the CA did not alter an+ fat or evidene. It merel+resolved the aforementioned issue, as indeed it was e2petedto. That it did so in a manner dierent from that of the CTA didnot neessaril+ impl+ a reversal of fatual ndin!s.

The distintion 3etween a uestion of law and a uestion offat is lear


12/22

or!ani=ations, as well as that arisin! from an+ ativit+ itonduts for prot, is ta2a3le. The phrase (an+ of theirativities onduted for prot( does not ualif+ the word(properties.( This ma?es from the propert+ of the or!ani=ationta2a3le, re!ardless of how that inome is used Q whether forprot or for loft+ nonene, Respondent Court ofAppeals ommitted reversi3le error when it allowed, onreonsideration, the ta2 e2emption laimed 3+ 1CA oninome it derived from rentin! out its real propert+, on thesolitar+ 3ut unonvinin! !round that the said inome is notolleted for prot 3ut is merel+ inidental to its operation.

The law does not ma?e a distintion. The rental inome ista2a3le re!ardless of whene suh inome is derived and howit is used or disposed of. Bhere the law does not distin!uish,neither should we.

Constitutional Provisions

-n Taxation

Invo?in! not onl+ the NIRC 3ut also the fundamental law,private respondent su3mits that Artile VI, Setion 7 of par. 5of the /%7$ Constitution, 4e2empts (harita3le institutions(from the pa+ment not onl+ of propert+ ta2es 3ut also of

inome ta2 from an+ soure.

In support of its novel theor+,it ompares the use of the words (harita3le institutions,((atuall+( and (diretl+( in the /%$5 and the /%7$Constitutions, on the one hand and in Artile VI, Setion ,par. 5 of the /%56 Constitution, on the other hand. 6

#rivate respondent enuniates three points.First, the presentprovision is divisi3le into two ate!ories' :/; (Mharita3leinstitutions, hurhes and parsona!es or onventsappurtenant thereto, mosues and non


13/22

Assoiations as the National "oard ma+ deide.( 4?In sum, wend no 3asis for !rantin! the 1CA e2emption from inometa2 under the onstitutional provision invo?ed.

Cases Cited by Private

Respondent Inapplicable

The ases 49relied on 3+ private respondent do not support itsause.91C of 1anila v. Collector of Internal Revenue 0and

bra 6alley College, Inc. v. %uino1are not applia3le,3eause the ontrovers+ in 3oth ases involved e2emptionfrom the pa+ment of propert+ ta2, not inome ta2. !ospital de/an ?uan de 5ios, Inc. v. Pasay Cityis not in point either,3eause it involves a laim for e2emption from the pa+mentof re!ulator+ fees, speiall+ eletrial inspetion fees,imposed 3+ an ordinane of #asa+ Cit+ Q an issue not at allrelated to that involved in a laimed e2emption from thepa+ment of inome ta2es imposed on propert+ leases. In

?esus /acred !eart College v. Com. of Internal Revenue, 3thepart+ therein, whih laimed an e2emption from the pa+mentof inome ta2, was an eduational institution whih su3mittedsu3stantial evidene that the inome su3@et of theontrovers+ had 3een devoted or used solel+ for eduationalpurposes. On the other hand, the private respondent in thepresent ase has not !iven an+ proof that it is an eduationalinstitution, or that part of its rent inome is atuall+, diretl+

and e2lusivel+ used for eduational purposes.

Epilogue

In deli3eratin! on this petition, the Court e2presses itss+mpath+ with private respondent. It appreiates the no3ilit+of its ause. >owever, the CourtGs power and funtion arelimited merel+ to appl+in! the law fairl+ and o3@etivel+. Itannot han!e the law or 3end it to suit its s+mpathies andappreiations. Otherwise, it would 3e overspillin! its role andinvadin! the realm of le!islation.

Be onede that private respondent deserves the help andthe enoura!ement of the !overnment. It needs laws that anfailitate, and not frustrate, its humanitarian tas?s. "ut theCourt re!rets that, !iven its limited onstitutional authorit+, itannot rule on the wisdom or propriet+ of le!islation. Thatprero!ative 3elon!s to the politial departments of!overnment. Indeed, some of the mem3ers of the Court ma+even 3elieve in the wisdom and prudene of !rantin! moreta2 e2emptions to private respondent. "ut suh 3elief,however well)R)FOR), the petition is 4RANT)D. The Resolutions of theCourt of Appeals dated Septem3er 7, /%%6 and Fe3ruar+ %,/%%0 are here3+ R)V)RS)D and S)T ASID). The Deision ofthe Court of Appeals dated Fe3ruar+ /0, /%%6 is R)INSTAT)D,insofar as it ruled that the inome derived 3+ petitioner fromrentals of its real propert+ is su3@et to inome ta2. Nopronounement as to osts.

SO ORD)R)D.

S)COND DIVISION

G.R. No. 1104 (a&ar: ?, 1999

PILIPPINE AN5 / CMM2NICA)INS, petitioner,vs.

CMMISSINER / IN)ERNAL REVEN2E, C2R) / )AJAPPEALS a' C2R) / APPEALS, respondent.

K2IS2MING,J.:

This petition for review assails the Resolution 1of the Court ofAppeals dated Septem3er , /%%5 armingthe Deisionand a Resolution 3of the Court Of Ta2 Appeals whih deniedthe laims of the petitioner for ta2 refund and ta2 redits, anddisposingas follows'

IN VI)B OF A**, T>) FOR)4OIN4, theinstant petition for review, is D)NI)D dueourse. The Deision of the Court of Ta2Appeals dated 1a+ 8, /%%5 and itsresolution dated -ul+ 8, /%%5, are here3+AFFIR1)D in toto.

SO ORD)R)D.4

The Court of Ta2 Appeals earlier ruled as follows'

B>)R)FOR), #etitionerGs laim for

refundta2 redits of overpaid inome ta2 for/%76 in the amount of #6,%%,$&%.%6 ishere3+ denied for havin! 3een led 3e+ondthe re!lementar+ period. The /%70 laim forrefund amountin! to #5&,8$$.0% is li?ewisedenied sine petitioner has opted and in allli?elihood automatiall+ redited the sameto the sueedin! +ear. The petition forreview is dismissed for la? of merit.

SO ORD)R)D.

The fats on reord show the anteedent irumstanespertinent to this ase.

#etitioner, #hilippine "an? of Communiations :#"Com;, aommerial 3an?in! orporation dul+ or!ani=ed under#hilippine laws, led its uarterl+ inome ta2 returns for therst and seond uarters of /%76, reported prots, and paidthe total inome ta2 of #6,8/0,%6&.88. The ta2es due weresettled 3+ appl+in! #"ComGs ta2 redit memos andaordin!l+, the "ureau of Internal Revenue :"IR; issued Ta2De3it 1emo Nos. 8$&0


14/22

#endin! the investi!ation of the respondent Commissioner ofInternal Revenue, petitioner instituted a #etition for Review onNovem3er /7, /%77 3efore the Court of Ta2 Appeals :CTA;.

The petition was do?eted as CTA Case No. &58% entitled'(#hilippine "an? of Communiations vs. Commissioner ofInternal Revenue.(

The losses petitioner inurred as per the summar+ ofpetitionerGs laims for refund and ta2 redit for /%76 and/%70, led 3efore the Court of Ta2 Appeals, are as follows'

/%76 /%70

QQQ QQQ

Net Inome :*oss; :#6,5/$,77.88;:#/&,/%,08.88;

Ta2 Due NI* NI*

Wuarterl+ ta2.

#a+ments 1ade 6,8/0,%6&.88 Q

Ta2 Bithheld at Soure 7,$%6.685&,8$$.0%

QQQQQQQQ QQQQQQQ

)2ess Ta2 #a+ments #6,%%,$&%.68#5&,8$$.0%

CTAGs deision reUets#"ComGs /%76 ta2 laimas #6,%%,$&%.%6. A fort+ve entavo dierenewas noted.

On 1a+ 8, /%%5, the CTA rendered a deision whih, asstated on the outset, denied the reuest of petitioner for a ta2refund or redit in the sum amount of #6,%%,$&%.%6, on the!round that it was led 3e+ond the twooweveron Septem3er , /%%5, the Court of Appeals armed in totothe CTAGs resolution dated -ul+ 8, /%%5. >ene this petitionnow 3efore us.

The issues raised 3+ the petitioner are'

I. Bhether ta2pa+er#"Com Q whih relied in!ood faith on the formalassuranes of "IR in R1CNo. $) FI*IN4 OF T>) FINA*AD-EST1)NT R)TERN.

TO' All Internal Revenue Oers and OthersConerned.

Se. 76 And 70 Of the National InternalRevenue Code provide'

222 222 222

The fore!oin! provisions are implemented3+ Setion $ of Revenue Re!ulations Nos./8


15/22

Appeals within the two


16/22

not suh ta2, penalt+, or sum has 3een paidunder protest or duress.

In an+ ase, no suc# suit or proceedingss#all begun after t#e expiration of t"o yearsfrom t#e date of payment of t#e tax or

penalty regardless of any superveningcause t#at may arise after paymentProvided #o"ever, That the Commissionerma+, even without a written laim therefor,refund or redit an+ ta2, where on the faeof the return upon whih pa+ment wasmade, suh pa+ment appears learl+ tohave 3een erroneousl+ paid. :)mphasissupplied;

The rule states that the ta2pa+er ma+ le a laim for refund orredit with the Commissioner of Internal Revenue, within two:; +ears after pa+ment of ta2, 3efore an+ suit in CTA isommened. The two


17/22

ase 3eause the nullit+ of R1C No. $


18/22

withholdin!inome ta2 return . . . . . . . . . . . . . . . .. . . . . . . . .

TOTA* A1OENT DE) CO**)CTI"*) .. . .

#58,0$5.88

/%6&

4ross premium per investi!ation . . . .. . . . . .

#$78.778.07

Bithholdin! ta2 due thereon at&9 . . . . . . . .

#/7&,&//.88

69 surhar!e . . . . . . . . . . . . . . . . . .. . . . . . . .

#/7&,&//.88

Compromise for non


19/22

estopped from olletin! ta2es 3+ the mista?es or errors of itsa!ents.5

In respet to the uestion of whether or not reinsuranepremiums eded to forei!n reinsurers not doin! 3usiness inthe #hilippines are su3@et to withholdin! ta2 under Setion 65and 6& of the Ta2 Code, sue it to state that this uestionhas alread+ 3een answered in the armative in lexander!o"den & Co., ;td. vs. Collector of Internal Revenue, *IRD DIVISION

G.R. No. 1704 A&*&s# ?, 199?

PILEJ MINING CRPRA)IN, petitioner,vs.CMMISSINER / IN)ERNAL REVEN2E, C2R) /APPEALS, a' )E C2R) / )AJ APPEALS,respondents.

RMER,J.:

#etitioner #hile2 1inin! Corp. assails the deision of the Courtof Appeals promul!ated on April 7, /%%0 in CAAR4)INT)R)ST TOTA* )CIS)

TA DE)

nd Wtr., /%%/ /,%//,/&.08 5,$,$7/./65,5$7,//0./0 /%,6/$,8/.%/

5rd Wtr., /%%/ /&,%%&,$&%./ 5,$&7,07$.58,%$7,&8%.8% /,$/,7&6.08

&th Wtr., /%%/ /%,&80,&78./5 &,76/,08.85,05/,75$.$ 0,77%,%5$.77

QQQQQ QQQQQ QQQQQQ QQQQQQ

&$,5/,565.%&//,77,877.&77,%77,50.%$07,/7,786.5%

Ta2 *aw Fullte2t :/stset; H /%


20/22


/st Wtr., /%% 5,5&/,7&%.%& 6,756,&0.&%/,$/8,00%.7 58,77$,%7.6

nd Wtr., /%% /%,0$/,0%/.$0 &,%/$,%.%&/6,678./7 &,786,/%&.77


&5,8/5,6&/.$8/8,$65,576.&5/,%0,68.8866,0%5,/$$./5


%8,56,7%6.0&,67/,&$5.%//8,%/&,0/.%$/5,7/,%7.6 3

In a letter dated Au!ust 8, /%%, 4#hile2 protested thedemand for pa+ment of the ta2 lia3ilities statin! that it haspendin! laims for VAT input reditrefund for the ta2es it paidfor the +ears /%7% to /%%/ in the amount of #//%,%$$,85$.8plus interest. Therefore these laims for ta2 reditrefundshould 3e applied a!ainst the ta2 lia3ilities, itin! our rulin! inCommissioner of Internal Revenue v. Itogon=/uyoc 1ines, Inc.

In repl+, the "IR, in a letter dated Septem3er $, /%%, 6foundno merit in #hile2Gs position. Sine these pendin! laims havenot +et 3een esta3lished or determined with ertaint+, itfollows that no le!al ompensation an ta?e plae. >ene, the

"IR reiterated its demand that #hile2 settle the amount plusinterest within 58 da+s from the reeipt of the letter.

In view of the "IRGs denial of the osettin! of #hile2Gs laim forVAT input reditrefund a!ainst its e2ise ta2 o3li!ation, #hile2raised the issue to the Court of Ta2 Appeals on Novem3er 0,/%%. 7In the ourse of the proeedin!s, the "IR issued Ta2Credit Certiate SN 88/$%6 in the amount of #/5,/&&,5/5.77whih, applied to the total ta2 lia3ilities of #hile2 of#/5,7/,%7.6 eetivel+ lowered the latterGs ta2o3li!ation to #//8,0$$,077.6.

Despite the redution of its ta2 lia3ilities, the CTA still ordered#hile2 to pa+ the remainin! 3alane of #//8,0$$,077.6 plusinterest, eluidatin! its reason, to wit'

Thus, for le!al ompensation to ta?e plae,3oth o3li!ations must 3e li%uidated anddemandable. (*iuidated( de3ts are thosewhere the e2at amount has alread+ 3eendetermined :#ARAS, Civil Code of the#hilippines, Annotated, Vol. IV, Ninth )dition,p. 6%;. In the instant ase, the laims ofthe #etitioner for VAT refund is still pendin!liti!ation, and still has to 3e determined 3+this Court :C.T.A. Case No. &$8$;. A fortiori,the li%uidated debtof the #etitioner to the!overnment annot, therefore, 3e set)R)FOR), the appeal 3+ wa+ of petition

for review is here3+ DIS1ISS)D and thedeision dated 1arh /0, /%%6 is AFFIR1)D.

#hile2 led a motion for reonsideration whih was,nevertheless, denied in a Resolution dated -ul+ //, /%%0. 13

>owever, a few da+s after the denial of its motion forreonsideration, #hile2 was a3le to o3tain its VAT inputreditrefund not onl+ for the ta2a3le +ear /%7% to /%%/ 3utalso for /%% and /%%&, omputed as follows' 14

#eriod Covered Ta2 Credit Date

"+ Claims For Certiate of

VAT refundredit Num3er Issue Amount

/%%& :nd Wuarter; 88$$58 // -ul+ /%%0#6,5/$,65&.8/

/%%& :&th Wuarter; 88$$5/ // -ul+ /%%0#/,$%/,88.0/

/%7% 88$$5 // -ul+ /%%0 #5$,5,$%%./%

/%%8


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the ta2pa+er are not reditors and de3tors of eah other. 17There is a material distintion 3etween a ta2 and de3t. De3tsare due to the 4overnment in its orporate apait+, whileta2es are due to the 4overnment in its soverei!n apait+. 1?Be nd no o!ent reason to deviate from the aforementioneddistintion.

#resindin! from this premise, in Francia v. Intermediateppellate Court, 19we ate!oriall+ held that ta2es annot 3esu3@et to setowever, when the NationalInternal Revenue Code of /%$$ was enated, the sameprovision upon whih the Itogon=/uyocpronounement was3ased was omitted. Aordin!l+, the dotrine enuniated inItogon=/uyocannot 3e invo?ed 3+ #hile2.

Despite the fore!oin! rulin!s learl+ adverse to #hile2Gsposition, it asserts that the imposition of surhar!e andinterest for the non


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presri3ed 3+ law. 3?Seond, if the ination an 3eharateri=ed as willful ne!let of dut+, then reourse underthe Civil Code and the Ta2 Code an also 3e availed of.

Art. $ of the Civil Code provides'

Art. $. An+ person suerin! material ormoral loss 3eause a pu3li servant oremplo+ee refuses or ne!lets, without @ustause, to perform his oial dut+ ma+ lean ation for dama!es and other relief

a!ainst the latter, without pre@udie to an+disiplinar+ ation that ma+ 3e ta?en.

1ore importantl+, Setion 0% :; of the National InternalRevenue At of /%%$ states'

222 222 222

:; Bilfull+ ne!letin! to !ive reeipts, as 3+law reuired for an+ sum olleted in theperformane of dut+ or"ilfully neglecting to

perform, any ot#er duties en

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