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T A X A T I O N L A W 2005 CENTRALIZED B AR OPERATIONS

MOST FREQUENTLY ASKED TOPICSSource: UP Law Center

General Principles

1. Why is the power to tax considered inherent in a sovereign State? [2003 Bar Exams]

It is considered inherent in a soverein State !eca"se it is a necessar# attri!"te o$ sovereint#% &itho"t this 'o(er no soverein State can e)ist or end"re% The 'o(er to ta)'roceeds "'on the theor# that the e)istence o$ a overn*ent is a necessit# and this 'o(eris an essentia+ and inherent attri!"te o$ sovereint#, !e+onin as a *atter o$ riht to ever#inde'endent state or overn*ent% No soverein State can contin"e to e)ist (itho"t *eansto 'a# its e)'enses- and that $or those *eans, it has the riht to co*'e+ a++ citi.ens and'ro'ert# (ithin its +i*its to contri!"te, hence, the e*erence o$ the 'o(er to ta)% /01 A*%2"r%, Ta)ation 345

2. he !ity o" #ani$a% in order to so$ve the tra""ic pro&$em in its &'siness districts% decided toimpose a tax% to &e paid &y the driver% on a$$ private cars entering the city d'ring pea( ho'rs"rom )*00 a.m. to +*00 a.m. "rom #ondays to ,ridays% &'t exempts those cars carrying morethan two occ'pants% exc$'ding the driver. -s the ordinance va$id? [2003 Bar Exams]

The ordinance is in vio+ation o$ the R"+e o$ Uni$or*it# and E6"a+it#, (hich re6"ires thata++ s"!7ects or o!7ects o$ ta)ation, si*i+ar+# sit"ated *"st !e treated a+i8e in e6"a+ $ootinand *"st not c+assi$# the s"!7ects in an ar!itrar# *anner% In the case at !ar, the ordinancee)e*'ts cars carr#in *ore than t(o occ"'ants $ro* coverae o$ the said ordinance%F"rther*ore, the ordinance on+# i*'oses the ta) on 'rivate cars, and e)e*'ts '"!+icvehic+es $ro* the i*'osition o$ the ta), a+tho"h !oth contri!"te to the tra$$ic 'ro!+e*%There e)ists no s"!stantia+ standard "sed in the c+assi$ication !# the Cit# o$ Mani+a%

Another iss"e is the $act that the ta) is i*'osed on the driver o$ the vehic+e and not on

the reistered o(ner o$ the sa*e% The ta) does not on+# vio+ate the re6"ire*ent o$ "ni$or*it#, !"t the sa*e is a+so "n7"st !eca"se it '+aces the !"rden on so*eone (ho hasno contro+ over the ro"te o$ the vehic+e.

3. !ongress% a"ter m'ch p'&$ic hearing and cons'$tations with vario's sectors o" society% cameto the conc$'sion that it wi$$ &e good "or the co'ntry to have on$y one system o" taxation &ycentra$iing the imposition and co$$ection o" taxes in the nationa$ government. /ccording$y% itis thin(ing o" passing a $aw that wo'$d a&o$ish the taxing power o" a$$ $oca$ government 'nits.-n yo'r opinion% wo'$d s'ch a $aw &e va$id 'nder the present !onstit'tion? Exp$ain yo'r answer.[2001 Bar Exams]

No% The +a( centra+i.in the i*'osition and co++ection o$ a++ ta)es in the nationa+overn*ent (o"+d contravene the Constit"tion (hich *andates that9 :;;%Each +oca+

overn*ent "nit sha++ have the 'o(er to create their o(n so"rces o$ reven"e and to +ev#ta)es, $ees and chares s"!7ect to s"ch "ide+ines and +i*itations as Conress *a# 'rovideconsistent (ith the !asic 'o+ic# o$ +oca+ a"tono*#%< It is c+ear that Conress can on+# ivethe "ide+ines and +i*itations on the e)ercise !# the +oca+ overn*ents o$ the 'o(er to ta)!"t (hat (as ranted !# the $"nda*enta+ +a( cannot !e (ithdra(n !# the Conress%

. /mong the taxes imposed &y the B'rea' o" -nterna$ even'e are income tax% estate anddonors tax% va$'e added tax% excise tax% other percentage taxes% and doc'mentary stamp tax.!$assi"y these taxes into direct and indirect taxes% and di""erentiate direct "rom indirect taxes.[2000 Bar Exams]

Inco*e ta), estate ta) and donor=s ta) are considered as direct ta)es% On the otherhand, va+"e added ta), e)cise ta), other 'ercentae ta)es, and doc"*entar# sta*' ta) are

indirect ta)es%Direct ta)es are de*anded $ro* the ver# 'erson (ho, as intended, sho"+d 'a# the ta)

(hich he cannot shi$t to another- (hi+e an indirect ta) is de*anded in the $irst instance

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San BedaCollege of Law

T A X A T I O N L A W

$ro* one 'erson (ith the e)'ectation that he can shi$t the !"rden to so*eone e+se, not asa ta) !"t as a 'art o$ the '"rchase 'rice%

. /n Exec'tive 4rder was iss'ed p'rs'ant to $aw% granting tax and d'ty incentives on$y to&'sinesses and residents within the 5sec'red area6 o" the S'&ic Economic Specia$ 7one% anddenying said incentives to those who $ive within the 7one &'t o'tside s'ch 5sec'red area6. -sthe constit'tiona$ right to e8'a$ protection o" the $aw vio$ated &y the Exec'tive 4rder?Exp$ain. [2000 Bar Exams]

No% E6"a+ 'rotection o$ the +a( c+a"se is s"!7ect to reasona!+e c+assi$ication%C+assi$ications, to !e va+id, *"st /15 rest on s"!stantia+ distinctions, /?5 !e er*ane to the'"r'ose o$ the +a(, /@5 not !e +i*ited to e)istin conditions on+#, /35 e6"a++# to a++ *e*!erso$ the sa*e c+ass%

There are s"!stantia+ di$$erences !et(een !i investors !ein enticed to the :sec"redarea< and the !"siness o'erators o"tside that are in accord (ith the e6"a+ 'rotection

c+a"se that does not re6"ire territoria+ "ni$or*it# o$ +a(s% The c+assi$ication a''+iese6"a++# to a++ resident individ"a+s and !"sinesses (ithin the :sec"red area<% The residents,!ein in +i8e circ"*stances to contri!"tin direct+# to the achieve*ent o$ the end '"r'oseo$ the +a(, are not cateori.ed $"rther% Instead, the# are si*i+ar+# treated, !oth in'rivi+ees and o!+iations re6"ired. (Tiu, et al. vs. Court of Appeals. GR No. 1!"1#.

$anuar% #, 1&&&'

9. : is the owner o" a residentia$ $ot sit'ated at ;'rino /ven'e% <asay !ity. he $ot has anarea o" 300 s8'are meters. 4n ='ne 1% 1++% 100 s8'are meters o" said $ot owner &y : wasexpropriated &y the government to &e 'sed in the widening o" ;'irino /ven'e% "or <hp300%000representing the estimated assessed va$'e o" said portion. ,orm 1++1 to 1++% :% who is a&'sinessman% has not &een paying his income taxes. : is now &eing assessed "or the 'npaidincome taxes in the tota$ amo'nt o" <hp10%000. : c$aims the income tax $ia&i$ity has a$ready

&een compensated &y the amo'nt o" <hp300%000 which the government owes him "or theexpropriation o" his property. >ecide. [1++9 Bar Exams]

The inco*e ta) +ia!i+it# o$ > can not !e co*'ensated (ith the a*o"nt o(ed !# theovern*ent as co*'ensation $or his 'ro'ert# e)'ro'riated% Ta)es are o$ distinct 8ind,essence and nat"re than ordinar# o!+iations% Ta)es and de!ts cannot !e the s"!7ect o$ co*'ensation !eca"se the overn*ent and > are not *"t"a++# creditors and de!tors o$ each other and a c+ai* $or ta)es is not a de!t, de*and, contract, or 7"d*ent as isa++o(a!+e to !e setBo$$ . (rancia vs. )AC. GR No. !*!"&. $une +, 1&++'

. :% a $essor o" a property% pays rea$ estate taxes on the premises% a rea$ estate dea$ers tax&ased on renta$ receipts and income tax on the renta$s. : c$aims that this is do'&$e taxation.>ecide. [1++9 Bar Exams]

There is no do"!+e ta)ation% Do"!+e ta)ation *eans ta)in $or the sa*e ta) 'eriod thesa*e thin or activit# t(ice, (hen it sho"+d !e ta)ed !"t once, !# the sa*e ta)ina"thorit# $or the sa*e '"r'ose and (ith the sa*e 8ind and character o$ ta)% The rea+estate ta) is a ta) on 'ro'ert#- the rea+ estate dea+er=s ta) is a ta) on the 'rivi+ee toenae in !"siness- (hi+e the inco*e ta) is a ta) on the 'rivi+ee to earn an inco*e% Theta)es are i*'osed !# di$$erent ta)in a"thorities and are essentia++# o$ di$$erent 8ind andcharacter% (illanueva vs. Cit% of )loilo. * SCRA -!+'

)ncoe Ta/ation

). :% whi$e driving home "rom his o""ice% was serio's$y in@'red when his a'tomo&i$e was

&'mped "rom &ehind &y a &'s driven &y a rec($ess driver. /s% a res'$t% he had to pay <200%000to his doctor and <100%000 to the hospita$ where he was con"ined "or treatment. Ae "i$ed a s'itagainst the &'s driver and the &'s company and was awarded and paid act'a$ damages o"

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<300%000 &y way o" mora$ damages and <0%000"or what he had to pay his attorney "or &ringinghis case to co'rt.

Which% i" any% o" the "oregoing awards are taxa&$e income to : and which are not? Exp$ain.[2003 Bar Exams]

Nothin is ta)a!+e% Under the Ta) Code, an# a*o"nt received as co*'ensation $or'ersona+ in7"ries or sic8ness, '+"s the a*o"nts $or an# da*aes received (hether !# s"it oraree*ent, on acco"nt o$ s"ch in7"ries or sic8ness sha++ !e e)c+"ded $ro* ross inco*e%Since the entire a*o"nt o$ P304,444 received are a(ards o$ da*aes o$ the in7"riess"stained, a++ sha++ !e e)c+"ded $ro* his ross inco*e% O!vio"s+#, these da*aes areconsidered !# +a( as *ere ret"rn o$ ca'ita+ /Sec%@? /5/35, 1 Ta) Code5%

+. 4n 03 =an'ary 1++)% :% a ,i$ipino citien residing in the <hi$ippines% p'rchased one h'ndred100C shares in the capita$ stoc( o" D !orporation% a domestic company. 4n 03 =an'ary 2000% D!orp. dec$ared% o't o" the pro"its o" the company earned a"ter 01 =an'ary 1++)% a h'ndredpercent 100C stoc( dividends on a$$ stoc(ho$ders o" record as o" 31 >ecem&er 1+++ as a res'$to" which : ho$ding in D !orp. &ecame two h'ndred 200C shares. /re the stoc( dividends

received &y : s'&@ect to income tax? Exp$ain. [2003 Bar Exams]

NO% Stoc8 dividends are not rea+i.ed inco*e% Accordin+#, the di$$erent 'rovisions o$ the Ta) Code i*'osin a ta) on dividend inco*e on+# inc+"des (ithin its '"rvie( cash and'ro'ert# dividends *a8in stoc8 dividends e)e*'t $ro* inco*e ta)% o(ever, i$ thedistri!"tion o$ stoc8 dividends is the e6"iva+ent o$ cash or 'ro'ert#, as (hen thedistri!"tion res"+ts in a chane o$ o(nershi' interest o$ the shareho+ders, the stoc8dividends (i++ !e s"!7ect to inco*e ta)% 5Section " (0' ('6 Section - (A'7(0'6 Section +(0'(-'(8', 1&&! Ta/ Co9e

10. :D7 ,o'ndation is a nonFstoc(% nonFpro"it association d'$y accredited "or re$igio's%charita&$e and socia$ we$"are p'rposes. Gast =an'ary 3% 2000 it so$d a portion o" its $ot 'sed "orre$igio's p'rposes and 'ti$ied the entire proceeds "or the constr'ction o" a &'i$ding to ho'se

its "ree >ay and Hight !are !enter "or chi$dren o" sing$e parents. -n order to s'&sidie theexpenses o" the !enter and to s'pport its re$igio's% charita&$e and socia$ we$"are pro@ects% the,o'ndation $eased the 300Fs8'are meter area o" the second and third "$oors o" the &'i$ding "or'se as a &oarding ho'se. he ,o'ndation a$so operates a canteen and a gi"t shop within thepremises% a$$ the income "rom which is 'sed act'a$$y% direct$y% and exc$'sive$y "or the p'rposes"or which the ,o'ndation was organied.

a. !onsidering the !onstit'tiona$ provision granting tax exemption to nonFstoc(corporations s'ch as those "ormed exc$'sive$y "or re$igio's% charita&$e and socia$we$"are p'rposes% exp$ain the meaning o" the $ast paragraph o" said Sec.30 o" the 1++ax !ode which states that 5income o" whatever (ind and character o" the "oregoingorganiations "rom any o" their properties% rea$ or persona$% or "rom any o" theiractivities cond'cted "or pro"it regard$ess o" the disposition made o" s'ch income sha$$&e s'&@ect to tax 'nder this !ode6. [2003 Bar Exams]

The e)e*'tion conte*'+ated in the Constit"tion covers rea+ estate ta) on rea+'ro'erties act"a++#, direct+# and e)c+"sive+# "sed $or re+iio"s, charita!+e and socia+ (e+$are'"r'oses% It does not cover e)e*'tion $ro* the i*'osition o$ the inco*e ta), (hich is(ithin the conte)t o$ Sec%@4 o$ the Ta) Code% As a r"+e, nonBstoc8, nonB'ro$it cor'orationsorani.ed $or re+iio"s, charita!+e or socia+ (e+$are '"r'oses are e)e*'t $ro* inco*e ta)on their inco*e receive !# the* as s"ch% o(ever, i$ these re+iio"s, charita!+e and socia+(e+$are cor'orations derived inco*e $ro* their 'ro'erties or an# o$ their activitiescond"cted $or 'ro$it, the inco*e ta) sha++ !e i*'osed on said ite*s o$ inco*e irres'ectiveo$ their dis'osition% (Sec.;#, N)RC6 C)R vs. <=CA. G.R. No. 1"#";. 51&&+'

&. -s the income derived &y :D7 ,o'ndation "rom the sa$e o" a portion o" its $ot% renta$s

"rom its &oarding ho'se and the operation o" its canteen and the gi"t shop s'&@ect totax? Exp$ain.

Yes% The inco*e derived $ro* the sa+e o$ +ot and renta+s $ro* its !oardin ho"se areconsidered as inco*e $ro* 'ro'erties (hich are s"!7ect to ta)% Li8e(ise the inco*e $ro*

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the o'erations o$ the canteen and the i$t sho' are inco*e $ro* its activities cond"cted $or'ro$it that are s"!7ect to ta)% The inco*e attaches irres'ective o$ the dis'osition o$ these

inco*es% (Sec.;#, N)RC6 C)R vs. <=CA. G.R. No. 1"#";. 51&&+'

11. / 5"ringe &ene"it6 is de"ined as &eing any good% service or other &ene"it "'rnished orgranted in cash or in (ind &y an emp$oyer to an individ'a$ emp$oyee. Wo'$d it &e the emp$oyeror the emp$oyee who is $ega$$y re8'ired to pay an income tax on it? [2003 Bar Exams]

It is the e*'+o#er (ho is +ea++# re6"ired to 'a# an inco*e ta) on the $rine !ene$it%The $rine !ene$it ta) is i*'osed as a $ina+ (ithho+din ta) '+acin the +ea+ o!+iation tore*it the ta) on the e*'+o#er, s"ch that, i$ the ta) is not 'aid the +ea+ reco"rse o$ the IR is to o to a$ter the e*'+o#er% An# a*o"nt or va+"e received !# the e*'+o#ee as a $rine!ene$it is considered ta) 'aid hence, net o$ the inco*e ta) d"e thereon% The 'erson (hois +ea++# re6"ired to 'a# /sa*e as stat"tor# incidence as distin"ished $ro* econo*icincidence5 is that 'erson (ho, in case o$ nonB'a#*ent, can !e +ea++# de*anded to 'a# the

ta)%

12. aC Aow o"ten does a domestic corporation "i$e income tax ret'rn "or income earned d'ringa sing$e taxa&$e year? Exp$ain the process. [2001 Bar Exams]

A do*estic cor'oration is re6"ired to $i+e an inco*e ta) ret"rns $o"r /35 ti*es $orinco*e earned d"rin a sin+e ta)a!+e #ear% Q"arter+# ret"rns are re6"ired to !e $i+ed $orthe $irst three 6"arters (here the cor'oration sha++ dec+are its 6"arter+# s"**ar# o$ rossinco*e and ded"ctions on a c"*"+ative !asis% (Sec. !-, N)RC'% Then a $ina+ ad7"st*entret"rn is re6"ired to !e $i+ed coverin the tota+ ta)a!+e inco*e $or the entire #ear,ca+endar or $isca+% (Sec. !*, N)RC'

&C What is the reason "or s'ch proced're?

The reason $or s"ch 'roced"re is to ens"re the ti*e+iness o$ co++ection to *eet the!"detar# needs o$ the overn*ent% Li8e(ise, it is desined to ease the !"rden on theta)'a#er !# 'rovidin it (ith an insta++*ent 'a#*ent sche*e, rather than re6"irin the'a#*ent o$ the ta) on a +"*'Bs"* !asis a$ter the end o$ the #ear% It is a+so to i*'rove the+i6"idit# o$ the overn*ent%

13. /% doctor &y pro"ession% so$d in the year 2000 a parce$ o" $and which he &o'ght as a "orm o" investment in 1++0 "or <hp 1 mi$$ion. he $and was so$d to B% his co$$eag'e% at a time when therea$ estate prices had gone down and so the $and was so$d on$y "or <hp)00%000 which was thenthe "air mar(et va$'e o" the $and. Ae 'sed the proceeds to "inance his trip to the InitedStates. Ae c$aims that he sho'$d not &e made to pay the 9 "ina$ tax &eca'se he did not haveany act'a$ gain on the sa$e. -s his contention correct? Why? [2001 Bar Exams]

No% The GH ca'ita+ ains ta) on sa+e o$ a rea+ 'ro'ert# he+d as ca'ita+ asset is i*'osedon the inco*e 'res"*ed to have !een rea+i.ed $ro* the sa+e (hich is the $air *ar8et va+"eor se++in 'rice thereo$, (hichever is hiher% /Section "2, N)RC' Act"a+ ain is notre6"ired $or the i*'osition o$ the ta) !"t it is the ain !# $iction o$ +a( (hich is ta)a!+e%

1. >isting'ish /$$owa&$e >ed'ctions "rom <ersona$ Exemptions. Jive an examp$e o" ana$$owa&$e ded'ction and another examp$e "or persona$ exemption. [2001 Bar Exams]

The distinctions are as $o++o(s9a5 As to a*o"nt A++o(a!+e ded"ctions enera++# re$er to act"a+ e)'enses inc"rred in the

'"rs"it o$ trade, !"siness or 'ractice o$ 'ro$ession (hi+e 'ersona+- e)e*'tions are

ar!itrar# a*o"nts a++o(ed !# +a(%!5 As to nat"re A++o(a!+e ded"ctions constit"te !"siness e)'enses (hi+e 'ersona+e)e*'tions 'ertain to 'ersona+ e)'enses%

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c5 As to '"r'ose Ded"ctions are a++o(ed to ena!+e the ta)'a#er to reco"' his cost o$ doin !"siness (hi+e 'ersona+ e)e*'tions are a++o(ed to cover 'ersona+, $a*i+# and+ivin e)'enses%

d5 As to c+ai*ants A++o(a!+e ded"ctions can !e c+ai*ed !# a++ ta)'a#ers, cor'orate or

other(ise, (hi+e 'ersona+ e)e*'tions can !e c+ai*ed on+# !# individ"a+ ta)'a#ers%

1. -n order to "aci$itate the processing o" its app$ication "or a $icense "roma government o""ice% !orporation / "o'nd it necessary to pay the amo'nt o" <hp100%000 as a&ri&e to the approving o""icia$. -s the <hp100%000 ded'cti&$e "orm the gross income o" !orporation /? 4n the other hand% is the <hp100%000 taxa&$e income o" the approving o""icia$?Exp$ain yo'r answers. [2001 Bar Exams]

Since the a*o"nt o$ Ph'144,444 constit"tes a !ri!e, it is not a++o(ed as a ded"ction$or* ross inco*e o$ Cor'oration A% (Section ;"(A'(1'(c', N)RC'. o(ever, to the reci'ientovern*ent o$$icia+, the sa*e constit"tes a ta)a!+e inco*e% A++ inco*e $ro* +ea+ or i++ea+so"rces are ta)a!+e a!sent an# c+ear 'rovision o$ +a( e)e*'tin the sa*e% This is thereason (h# ross inco*e had !een de$ined to inc+"de inco*e $ro* (hatever so"rce

derived% (Section ;(A', N)RC'. I++ea++# ac6"ired inco*e constit"tes rea+i.ed inco*e"nder the c+ai* o$ riht doctrine. (Rut>in vs. US. ;"; US 1;#'

19. -s a nonFresident a$ien who is not engaged in trade or &'siness or in the exercise o" pro"essionin the <hi$ippines &'t who derived renta$ income "rom the <hi$ippines re8'ired to "i$e an incometax ret'rn on /pri$ o" the year "o$$owing his receipt o" said income? -" not% why not? Exp$ainyo'r answer. [2001 Bar Exams]

No% The inco*e ta) on a++ inco*e derived $ro* Phi+i''ine so"rces !# a nonBresidenta+ien (ho is not enaed in trade or !"siness in the Phi+i''ines is (ithhe+d !# the +essee asa Fina+ &ithho+din Ta)% (Section -!(A', N)RC'. The overn*ent can not re6"ire 'ersonso"tside o$ its territoria+ 7"risdiction to $i+e a ret"rn- $or this reason, the inco*e ta) oninco*e derived $ro* (ithin *"st !e co++ected thro"h the (ithho+din ta) s#ste* and th"s,

re+ieve the reci'ient o$ the inco*e the d"t# to $i+e inco*e ta) ret"rns% (Section -1, N)RC'

1. #r. =avier is a nonFresident senior citien. Ae receives a month$ypension "orm the JS-S% which he deposits with the <HBF#a(ati Branch. -s he exempt "romincome tax and there"ore not re8'ired to "i$e an income tax ret'rn? [2000 Bar Exams]

Mr% 2avier is e)e*'t $ro* inco*e ta) on his *onth+# SIS 'ension (Sec. ;(0'(*'(f',N)RC' !"t not on the interest inco*e that *iht accr"e on the 'ensions de'osited (ith PN(hich are s"!7ect to $ina+ (ithho+din ta)%

Conse6"ent+#, since Mr% 2avier=s so+e ta)a!+e inco*e (o"+d have !een s"!7ected to a$ina+ (ithho+din ta), he is not re6"ired an#*ore to $i+e an inco*e ta) ret"rn . (Sec. -1(A'('(c', N)RC'

1). / !o.% a <hi$ippine corporation% has an exec'tive <C who is a ,i$ipino citien. / !o. has as'&sidiary in Aong Kong AK !o.C and wi$$ assign < "or an inde"inite period to wor( "'$$ time "orAK !o. < wi$$ &ring his "ami$y to reside in AK and wi$$ $ease o't his residence in the <hi$ippines.he sa$ary o" < wi$$ &e sho'$dered 0 &y / !o. whi$e the other 0 p$'s ho'sing% cost o" $ivingand ed'cationa$ a$$owances o" <s dependents wi$$ &e sho'$dered &y AK !o. / !o. wi$$ creditthe 0 o" <s sa$ary to <s <hi$ippine &an( acco'nt. < wi$$ a$so &e receiving renta$ income "orthe $ease o" his <hi$ippine residence.

/re these sa$aries% a$$owances and renta$s s'&@ect to the <hi$ippine income tax? [1+++ BarExams]

The sa+aries and a++o(ances received !# P are not s"!7ect to Phi+i''ine inco*e ta)% P6"a+i$ies as a nonBresident citi.en !eca"se he +eaves the Phi+i''ines $or e*'+o#*ent

re6"irin hi* to !e 'h#sica++# 'resent a!road *ost o$ the ti*e d"rin the ta)a!+e #ear%(Section (', N)RC'. A nonBresident citi.en is ta)a!+e on+# on inco*e derived $ro*Phi+i''ine so"rces% /Section ?@, NIRC5% The sa+aries and a++o(ances received $ro* !eine*'+o#ed a!road are inco*e $ro* (itho"t !eca"se these are co*'ensation $or servicesrendered o"tside o$ the Phi+i''ines% (Section ", N)RC'

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o(ever, P is ta)a!+e on renta+ inco*e $or the +ease o$ his Phi+i''ine residence !eca"sethis is an inco*e derived $ro* (ithin, the +eased 'ro'ert# !ein +ocated in the Phi+i''ines%

(Section ", N)RC'

1+. /rno$d% who is sing$e% coha&its with Li$ma% who is $ega$$y married to 7achary. /rno$d and Li$mahave six minor chi$dren who $ive and depend 'pon /rno$d "or their chie" s'pport. he chi$drenare not married and not gain"'$$y emp$oyed. [1++) Bar Exams]

aC ,or income tax p'rposes% may /rno$d &e considered as 5head o" a "ami$y?6

Yes% An "n*arried *an (ho has i++eiti*ate *inor chi+dren (ho +ive (ith hi* andde'end "'on hi* $or their chie$ s"''ort is considered as :head o$ the $a*i+#%< (RR No. ?&+ ipleentin@ Section ;-, N)RC'

&C -s /rno$d entit$ed to ded'ct "rom his gross income% an additiona$ exemption "or each o" his i$$egitimate chi$d?

No% Arno+d is on+# entit+ed to ded"ct additiona+ 'ersona+ e)e*'tion $or $o"r /35 o"t o$ the si) /G5 i++eiti*ate chi+dren% The *a)i*"* n"*!er o$ de'endents $or '"r'oses o$ theadditiona+ 'ersona+ e)e*'tion is $o"r% (Section ;-, N)RC'

20. aC >isc'ss the meaning o" the J$o&a$ and Sched'$ar systems o" taxation. [1++ Bar Exams]

A +o!a+ s#ste* o$ ta)ation is one (here the ta)'a#er is re6"ired to +"*' "' a++ ite*s o$ inco*e earned d"rin a ta)a!+e 'eriod and 'a# "nder a sin+e set o$ inco*e ta) r"+es onthese di$$erent ite*s o$ inco*e%

A sched"+ar s#ste* o$ ta)ation 'rovides $or a di$$erent ta) treat*ent o$ di$$erent t#'eso$ inco*e so that a se'arate ta) ret"rn is re6"ired to !e $i+ed $or each t#'e o$ inco*e andthe ta) is co*'"ted on a 'er ret"rn or 'er sched"+e !asis%

B&C o which system wo'$d yo' say that the method o" taxation 'nder the Hationa$ -nterna$

even'e !ode &e$ongs? [1++ Bar Exams]

The *ethod o$ ta)ation "nder the NIRC is a co*!ination o$ !oth s#ste*s, th"s 'art+#sched"+ar and 'art+# +o!a+%

21. #r. Santos died intestate in 1+)+ $eaving his spo'se and "ive chi$dren as the on$y heirs. heestate consisted o" a "ami$y home and a "o'rFdoor apartment which was &eing rented totenants. Within the year% an extra@'dicia$ sett$ement o" the estate was exec'ted &y the heirs%each o" them receiving hisMher d'e share. he s'rviving spo'se ass'med administration o" theproperty. Each year% the net income "rom the renta$ property was distri&'ted to a$$%proportionate$y% on which they paid respective$y% the corresponding income tax.

-n 1++% the income tax ret'rns o" the heirs were examined and de"iciency income taxassessments were iss'ed against each o" them "or the years 1+)+ to 1++3% inc$'sive% as havingentered into an 'nregistered partnership. Were the assessments @'sti"ied? [1++ Bar Exams]

Yes, the assess*ents (ere 7"sti$ied !eca"se $or inco*e ta) '"r'oses, the coBo(nershi'o$ inherited 'ro'ert# is a"to*atica++# converted into an "nreistered 'artnershi' $ro* the*o*ent the said 'ro'erties are "sed as co**on $"nd (ith intent to 'rod"ce 'ro$its $or theheirs in 'ro'ortion to their shares in the inheritance%

Fro* the *o*ent o$ s"ch 'artition, the heirs are entit+ed a+read# to their res'ectivede$inite shares o$ the estate and the inco*e thereo$, $or each o$ the* to *anae anddis'ose o$ as e)c+"sive+# his o(n (itho"t the intervention o$ the other heirs, and,accordin+#, he !eco*es +ia!+e individ"a++# $or a++ ta)es in connection there(ith% I$ a$ter

s"ch 'artition, he a++o(s his shares to !e he+d in co**on (ith his coBheir "nder a sin+e*anae*ent to !e "sed (ith the intent o$ *a8in 'ro$it there!# in 'ro'ortion to his share,there can !e no do"!t that, even i$ no doc"*ent or instr"*ent (ere e)ec"ted $or the'"r'ose, $or ta) '"r'oses, at +east an "nreistered 'artnershi' is $or*ed% (3a vs. C)R, "-SCRA !"'

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22. >isg'ised dividends in income taxation? Jive an examp$e. [1++ Bar Exams]

Dis"ised dividends are those inco*e 'a#*ents *ade !# a do*estic cor'oration, (hich

is a s"!sidiar# o$ a nonBresident $orein cor'oration, to the +atter ostensi!+# $or servicesrendered !# the +atter to the $or*er, !"t (hich 'a#*ents are dis'ro'ortionate+# +arerthan the act"a+ va+"e o$ the services rendered% In s"ch case, the a*o"nt over and a!ovethe tr"e va+"e o$ the service rendered sha++ !e treated as a dividend and sha++ !e s"!7ectedto the corres'ondin ta) o$ @?H on Phi+i''ine so"rce ross inco*e or s"ch other're$erentia+ rate as *a# !e 'rovided "nder a corres'ondin Ta) Treat#%

Note: 2ivi9en9s receive9 8% a 9oestic corporation for anotBer 9oesticcorporation sBall not 8e su8ect to ta/. 5Sec. ! (2' ("', N)RC

state Ta/ an9 2onorDs Ta/

23. 4n the "irst anniversary o" the death o" D% his heirs hosted a s'mpt'o's dinner "or his

doctors% n'rses and others who attended to D d'ring his $ast i$$ness. he cost o" the dinneramo'nted to <hp0%000. !ompared to his gross estate% the <hp0%000 did not exceed "ivepercent o" the estate. -s the said cost o" the dinner to commemorate his one year deathanniversary ded'cti&$e "rom his gross estate? Exp$ain yo'r answer. [2001 Bar Exams]

No% This e)'ense (i++ not $a++ "nder an# o$ the a++o(a!+e ded"ctions $ro* ross estate%&hether vie(ed in the conte)t o$ either $"nera+ e)'enses or *edica+ e)'enses, the sa*e(i++ not 6"a+i$# as a ded"ction% E)'enses inc"rred a$ter the intern*ent, s"ch as 'ra#ers,*asses, entertain*ent, or the +i8e are not ded"cti!+e% An# 'ortion o$ the $"nera+ and!"ria+ e)'enses !orne or de$ra#ed !# re+atives and $riends o$ the deceased are notded"cti!+e% J3th 'ar%, Sec% G /A5 /15 Rev% Res% No% ?B?44@% Medica+ e)'enses, on the otherhand, are a++o(ed on+# i$ inc"rred !# the decedent (ithin one #ear 'rior to his death%5Section +* (A'(*', N)RC

Note: Eowever, pursuant to Rev. Re@s. No. F##;, e9ical e/penses as of tBe lastillness will not for part of funeral e/penses 8ut sBoul9 8e claie9 as e9ical e/pensesincurre9 witBin one (1' %ear 8efore tBe 9eatB of tBe 9ece9ent.

2. What conditions m'st occ'r in order that a$$ grants% donations and contri&'tions to nonFstoc(% nonFpro"it private ed'cationa$ instit'tions may &e exempt "rom the donors tax 'nderSec. 101 aC o" the ax !ode? [2000 Bar Exams]

The $o++o(in are the conditions915 Not *ore than thirt# /@4H5 o$ said i$ts sha++ !e "sed !# s"ch donee $or ad*inistration

'"r'oses-2) The ed"cationa+ instit"tions is incor'orated as a nonBstoc8 entit#, 'a#in no dividends,overned !# tr"stees (ho receive no co*'ensation, and devotin a++ its inco*e,(hether st"dents= $ees or i$ts, donations, s"!sidies or other $or*s o$ 'hi+anthro'#, tothe acco*'+ish*ent and 'ro*otion o$ '"r'oses en"*erated in its Artic+es o$ Incor'oration% (Sec. 1#1 (A' (;' N)RC of 1&&!'

2% >isc'ss the r'$e on sit's o" taxation with respect to the imposition o" the estate tax on property$e"t &ehind &y a nonFresident decedent. [2000 Bar Exams]

The va+"e o$ the ross estate o$ a nonBresident decedent (ho is a Fi+i'ino citi.en at theti*e o$ his death sha++ !e deter*ined !# inc+"din the va+"e at the ti*e o$ his death o$ a++'ro'ert#, rea+ or 'ersona+, tani!+e or intani!+e, (herever sit"ated to the e)tent o$ the

interest therein o$ the decedent at the ti*e o$ his death Jsec% 0 /A5, NIRC o$ 1% These'ro'erties sha++ have a sit"s o$ ta)ation in the Phi+i''ines hence s"!7ect to Phi+i''ineestate ta)es%

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On the other hand, in the case o$ a nonBresident decedent (ho at the ti*e o$ his death(as not a citi.en o$ the Phi+i''ines, on+# that 'art o$ the entire ross estate (hich is

sit"ated in the Phi+i''ines to the e)tent o$ the interest therein o$ the decedent at the ti*eo$ his death sha++ !e inc+"ded in his ta)a!+e estate% Provided, that, (ith res'ect tointani!+e 'ersona+ 'ro'ert#, (e a''+# the r"+e o$ reci'rocit#% ()8i9'

29. /% an individ'a$% so$d to B% his &rotherFinF$aw% his $ot with a mar(et va$'e o" <hp 4ne mi$$ion "or <hp900%000. /s cost in the $ot is <hp100%000. B is "inancia$$y capa&$e o" &'ying the $ot.

/ a$so owns : !o.% which has a "ast growing &'siness. / so$d some o" his shares o" stoc( in :!o. to his (ey exec'tives in : !o. hese exec'tives are not re$ated to /. he se$$ing price is<hp 3 mi$$ion% which is the &oo( va$'e o" the shares so$d &'t with a mar(et va$'e o" <hp mi$$ion. /s cost in the shares so$d is <hp 1 mi$$ion. he p'rpose o" / in se$$ing the shares is toena&$e his (ey exec'tives to ac8'ire a propriety o" / in se$$ing the shares is to ena&$e his (eyexec'tives to ac8'ire a propriety interest in the &'siness and have a persona$ sta(e in its

&'siness.Exp$ain i" the a&ove transactions are s'&@ect to donors tax. [1+++ Bar Exams]

The $irst transaction (here a +ot (as so+d !# A to his !rotherBinB+a( $or a 'rice !e+o( its$air *ar8et va+"e (i++ not !e s"!7ect to donor=s ta) i$ the +ot 6"a+i$ies as a ca'ita+ asset%The trans$er $or +ess than an ade6"ate and $"++ consideration, (hich ives rise to a dee*edi$t, does not a''+# to a sa+e o$ 'ro'ert# s"!7ect to ca'ita+ ains ta)% (Section 1##, N)RC'.o(ever, i$ the +ot so+d is an ordinar# asset, the e)cess o$ the $air *ar8et va+"e over theconsideration received sha++ !e considered as a i$t s"!7ect to the donor=s ta)%

The sa+e o$ shares o$ stoc8 !e+o( the $air *ar8et va+"e thereo$ is s"!7ect to the donor=sta) '"rs"ant to the 'rovisions o$ Section 144 o$ the Ta) Code% The e)cess o$ the $air*ar8et va+"e over the se++in 'rice is a dee*ed i$t%

2. / died% s'rvived &y his wi"e and three chi$dren. he estate tax wasproper$y paid and the estate sett$ed and divided and distri&'ted among the "o'r heirs. Gater%the B- "o'nd o't that the estate "ai$ed to report the income received &y the estate d'ringadministration. he B- iss'ed a de"iciency income tax assessment p$'s interest% s'rchargesand pena$ties. Since the three chi$dren are residing a&road% the B- so'ght to co$$ect the "'$$tax de"iciency on$y against the widow. -s the B- correct? [1+++ Bar Exams]

Yes, the IR is correct% In a case (here the estate ta) has !een distri!"ted to the heirs,the co++ection re*edies avai+a!+e to the IR in co++ectin ta) +ia!i+ities o$ an estate *a#either /15 s"e a++ the heirs and co++ect $ro* each o$ the* the a*o"nt o$ ta) 'ro'ortionateto the inheritance received or /?5 !# virt"e o$ the +ien created "nder Section ?1, s"e on+#one heir and s"!7ect the 'ro'ert# he received $ro* the estate to the 'a#*ent o$ the estateta)% The IR, there$ore, is correct in '"rs"in the second re*ed# a+tho"h this (i++ iverise to the riht o$ the heir (ho 'a#s to see8 rei*!"rse*ent $ro* the other heirs% (C)R vs.Pine9a. 1 SCRA 1#-'. In no case, ho(ever, can the IR en$orce the ta) +ia!i+it# in e)cess o$ the share o$ the (ido( in the inheritance%

2). -s the B- a'thoried to co$$ect estate tax de"iciencies &y the s'mmary remedy o" $evy 'pon andsa$e o" rea$ properties o" the decedent witho't "irst sec'ring the a'thority o" the co'rt sittingin pro&ate over the s'pposed wi$$ o" the decedent? [1++) Bar Exams]

Yes% The IR is a"thori.ed to co++ect estate ta) de$icienc# thro"h the s"**ar#re*ed# o$ +ev#in "'on and sa+e o$ rea+ 'ro'erties o$ a decedent, (itho"t the conition anda"thorit# o$ the co"rt sittin in 'ro!ate over the s"''osed (i++ o$ the deceased% As s"chthe estate ta) is e)e*'t, it is e)e*'ted $ro* the a''+ication o$ the stat"te o$ nonBc+ai*s,

and this is 7"sti$ied !# the necessit# o$ overn*ent $"ndin, i**orta+i.ed in the *a)i*that ta)es are the +i$e!+ood o$ the overn*ent% (=arcos vs. C)R. GR No. 1#++#. $une -,1&&!'

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2+. /re contri&'tions to a candidate in an e$ection s'&@ect to donors tax? 4nthe part o" the contri&'tor% is it a$$owa&$e as a ded'ction "rom gross income? [1++) Bar Exams]

a5 No, 'rovided the reci'ient candidate had co*'+ied (ith the re6"ire*ent $or $i+in

o$ ret"rns o$ contri!"tions (ith the Co**ission on E+ections as re6"ired "nder theO*ni!"s E+ection Code%

!5 The contri!"tor is not a++o(ed to ded"ct the contri!"tions !eca"se the saide)'ense is not direct+# attri!"ta!+e to, the deve+o'*ent, *anae*ent, o'eration andorcond"ct o$ a trade, !"siness or 'ro$ession (Section ;"(A'(1'(a', N)RC'. F"rther*ore, i$ thecandidate is an inc"*!ent overn*ent o$$icia+ or e*'+o#ee, it *a# even !e considered as a!ri!e or 8ic8!ac8% (Section ;"(A'(1'(a', N)RC'

Note: )n tBe recent case of A8ello vs. C)R, GR. No. 1#!1, e8ruar% ;, ##-, tBeSupree Court Bel9 tBat politicalelectoral contri8utions 9ul% reporte9 to tBe Coissionon lections a9e after tBe passa@e of RA No. !1**, as provi9e9 in Section 1; tBereof,are not su8ect to tBe pa%ent of an% @ift ta/. As sucB political contri8utions a9e

8efore RA No. !1**, are su8ect to tBe pa%ent of @ift ta/es, an9 RA No. !1** provi9esno retroactive effect on tBis point.

Ta/ A9inistration

30. #r. <asc'a$s income "rom $easing his property reaches the maxim'm rate o" tax'nder the $aw. Ae donated oneFha$" o" his said property to a nonFstoc(% nonFpro"it ed'cationa$instit'tion whose income and assets are act'a$$y% direct$y and exc$'sive$y 'sed "or ed'cationa$p'rposes% and there"ore 8'a$i"ied "or tax exemption 'nder /rtic$e :-L% Section 3C o" the!onstit'tion and Section 30AC o" the ax !ode. Aaving th's trans"erred a portion o" his saidasset% #r. <asc'a$ s'cceeded in paying a $esser tax on the renta$ income derived "rom hisproperty. -s there tax avoidance or tax evasion? Exp$ain. [2000 Bar Exams]

There is ta) avoidance% Mr% Pasc"a+ has e)'+oited a +ea++# 'er*issive a+ternative*ethod to red"ce his inco*e ta) !# trans$errin 'art o$ his renta+ inco*e to a ta)Be)e*'tentit# thro"h a donation o$ oneBha+$ o$ the inco*e 'rod"cin 'ro'ert#% The donation is+i8e(ise e)e*'t $ro* the donor=s ta)% The donation is the +ea+ *eans e*'+o#ed totrans$er the incidence o$ inco*e ta) on the renta+ inco*e%

31. / taxpayer is s'spected not to have dec$ared his correct gross income in his ret'rn "i$ed "or1++. he examiner re8'ested the !ommissioner to a'thorie him to in8'ire into the &an(deposits o" the taxpayer so that he co'$d proceed with the net worth method o" investigationto esta&$ish "ra'd. #ay the examiner &e a$$owed to $oo( into the taxpayers &an( deposits? -nwhat cases may the !ommissioner or his d'$y a'thoried representative &e a$$owed to in8'ireor $oo( into the &an( deposits o" a taxpayer? [2000 Bar Exams]

No, as this (o"+d !e vio+ative o$ Re'"!+ic Act No% 1340, the an8s De'osits Secrec#La(%

The Co**issioner o$ Interna+ Reven"e or his d"+# a"thori.ed re'resentative *a# !ea++o(ed to in6"ire or +oo8 into the !an8 de'osits o$ a ta)'a#er in the $o++o(in cases9

a5 For the '"r'ose o$ deter*inin the ross estate o$ a decedent-

b) &here the ta)'a#er has $i+ed an a''+ication $or co*'ro*ise o$ his ta) +ia!i+it# !#reason o$ $inancia+ inca'acit# to 'a# s"ch ta) +ia!i+it#% (Section *(f', N)RC'

c5 &here the ta)'a#er has sined a (aiver a"thori.in the Co**issioner or his d"+#a"thori.ed re'resentatives to in6"ire into the !an8 de'osits%

32. / !o.% a <hi$ippine corporation% is a &ig man'"act'rer o" cons'mer goods andhas severa$ s'pp$iers o" raw materia$s. he B- s'spects that some o" the s'pp$iers are not

proper$y reporting their income on their sa$es to / !o. he !- there"ore*a. -ss'ed an access $etter to / !o. to "'rnish the B- in"ormation on sa$es and payment to

its s'pp$iers.

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&. -ss'ed an access $etter to a &an( : Ban(C to "'rnish the B- on deposits o" somes'pp$iers o" / !o. on the a$$eged gro'nd that the s'pp$iers are committing tax evasion.

/ !o.% : Ban( and the s'pp$iers have not &een iss'ed &y the B- $etter o" a'thority toexamine. / !o. and : Ban( &e$ieve that the B- is on a 5"ishing expedition6 and come to yo' "orco'nse$. What is yo'r advice. [1+++ Bar Exams]

I (i++ advise A Co% and > an8 that the IR is 7"sti$ied on+# in ettin in$or*ation $ro*the $or*er !"t not $ro* the +atter% The IR is a"thori.ed to o!tain in$or*ation $ro* other'ersons other than those (hose interna+ reven"e ta) +ia!i+it# is s"!7ect to a"dit orinvestiation% o(ever this 'o(er sha++ not !e constr"ed as rantin the Co**issioner thea"thorit# to in6"ire into !an8 de'osits%

33. #ay the !ommissioner o" the -nterna$ even'e compromise the payment o" thewithho$ding tax tax ded'cted and withhe$d at so'rceC where the "inancia$ position o" thetaxpayer demonstrates a c$ear ina&i$ity to pay the assessed tax? [1++) Bar Exams]

No% A ta)'a#er (ho is constit"ted as (ithho+din aent (ho has ded"cted and (ithhe+dat so"rce the ta) on the inco*e 'a#*ent *ade !# hi* ho+ds the ta)es as tr"st $"nds $or theovern*ent (Section -+(2', N)RC' and is o!+iated to re*it the* to the IR% Thes"!se6"ent ina!i+it# o$ the (ithho+din aent to 'a#re*it the ta) (ithhe+d is not a ro"nd$or co*'ro*ise !eca"se the (ithho+din ta) is not a ta) "'on the (ithho+din aent !"t itis on+# a 'roced"re $or the co++ection o$ a ta)%

3. he Secretary o" ,inance% 'pon recommendation o" the !ommissioner o" -nterna$ even'e% iss'ed a even'e eg'$ation 'sing gross income as the tax &ase "orcorporations doing &'siness in the <hi$ippines.

-s the even'e eg'$ation va$id? [1++ Bar Exams]

The re"+ation esta!+ishin ross inco*e as the ta) !ase $or cor'orations doin !"sinessin the Phi+i''ines /do*estic as (e++ as resident $orein5 is not va+id% This is no +oneri*'+e*entation o$ the +a( !"t act"a++# it constit"tes +eis+ation !eca"se a*on the 'o(ersthat are e)c+"sive+# (ithin the +eis+ative a"thorit# to ta) is the 'o(er to deter*ine thea*o"nt o$ the ta). (see 1 Coole% 1!*F1+"'% Certain+#, i$ the ta) is +i*ited to ross inco*e(itho"t ded"ctions o$ these cor'orations, this is chanin the a*o"nt o$ the ta) as saida*o"nt "+ti*ate+# de'ends on the ta)a!+e !ase%

Note: TBe Presi9ent, Bowever, upon tBe recoen9ation of tBe Secretar% of inance, a% effective $anuar% 1, ###, allow corporations tBe option to 8e ta/e9 at(1-H of @ross incoe, after tBe followin@ con9itions Bave 8een satisfie9:

1. A ta/ effort ration of twent% percent (#H' of Gross National Pro9uct (GNP'6. A ration of fort% percent ("#H' of incoe ta/ collection to total ta/ revenues6;. A AT ta/ effort of four percent ("H' GNP6 an9". A #.& percent (#.&H ratio of tBe Consoli9ate9 Pu8lic Sector inancial Position

(CPSP' to GNP.

Ta/ Ree9ies un9er tBe N)RC

35. -n the investigation o" the withho$ding tax ret'rns o" AZ Medina Security Agency (AZ

Medina) "or the taxa&$e years 1++ and 1++)% a discrepancy &etween the taxes withhe$d "romits emp$oyees and the amo'nts act'a$$y remitted to the government was "o'nd. /ccording$y%

&e"ore the period o" prescription commenced to r'n% the B- iss'ed an assessment and ademand $etter ca$$ing "or the immediate payment o" the de"iciency withho$ding taxes in thetota$ amo'nt o" <20%000.00. !o'nse$ "or AZ Medina protested the assessment "or &eing n'$$and void on the gro'nd that no preFassessment notice had &een iss'ed. Aowever% the protest

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was denied. !o'nse$ then "i$ed a petition "or prohi&ition with the !o'rt o" ax /ppea$s torestrain the co$$ection o" the tax. [2002 Bar Exams]

/. -s the contention o" the co'nse$ tena&$e? Exp$ain.

No, the contention o$ the co"nse+ is "ntena!+e% Section ?? o$ the Ta) Code e)'ress+#'rovides that no 'reBassess*ent notice is re6"ired (hen a discre'anc# has !eendeter*ined !et(een the ta) (ithhe+d and the a*o"nt act"a++# re*itted !# the(ithho+din aent% Since the a*o"nt assessed re+ates to de$icienc# (ithho+din ta)es, theIR is correct in iss"in the assess*ent and de*and +etter ca++in $or the i**ediate'a#*ent o$ the de$icienc# (ithho+din ta)es% (Sec. +, N)RC'

B. Wi$$ the specia$ civi$ action "or prohi&ition &ro'ght &e"ore the !/ 'nder Sec.11 o" ./.Ho. 112 prosper? >isc'ss yo'r answer.

The S'ecia+ Civi+ action $or 'rohi!ition (i++ not 'ros'er, !eca"se the CTA has no 7"risdiction to entertain the sa*e% The 'o(er to iss"e (rit o$ in7"nction 'rovided $or "nder

Sec% 11 o$ R%A% 11?0 is on+# anci++ar# to its a''e++ate 7"risdiction to iss"e (rits o$ 'rohi!ition or in7"nction inde'endent+# o$ and a'art $ro* an a''ea+ed case% The re*ed# isto a''ea+ the decision o$ the IR% /Collector v. <useco. ; SCRA ;1; 51&*1'

39. #r. !astro inherited "rom his "ather% who died on ='ne 10% 1++% severa$ pieces o" rea$property in #etro #ani$a. he estate tax ret'rn was "i$ed and the estate tax d'e in theamo'nt o" <20%000.00 was paid on >ecem&er 9% 1++. he ax ,ra'd >ivision o" the B-investigated the case on the &asis o" con"identia$ in"ormation given &y #r. Santos on=an'ary 9% 1++) that the ret'rn "i$ed &y #r. !astro was "ra'd'$ent and that he "ai$ed todec$are a$$ properties $e"t &y his "ather with intent to evade payment o" the correct tax./s a res'$t% a de"iciency estate tax assessment "or <1%20%000.00% inc$'sive o" 0s'rcharge "or "ra'd% interest and pena$ty% was iss'ed against him on =an'ary 10% 2001. #r.!astro protested the assessment% on the gro'nd o" prescription. [2002 Bar Exams]

aC >ecide #r. !astroNs protest.

The 'rotest sho "+ d !e reso+ved aainst Mr% Castro% &hat (as $i+ed is a $ra"d"+entret"rn *a8in the 'rescri'tive 'eriod $or assess*ent ten #ears /145 $ro* discover# o$ the$ra"d (Section , N)RC'% Accordin+#, the assess*ent (as iss"ed (ithin the 'rescri'tive'eriod to *a8e an assess*ent !ased on a $ra"d"+ent ret"rn%

&C What $ega$ re8'irements m'st #r. Santos comp$y with so that he can c$aim hisreward? Exp$ain.

The +ea+ re6"ire*ents that *"st !e co*'+ied !# Mr% Santos to entit+e hi* to re(ardare as $o++o(s91. e sho"+d vo+"ntari+# $i+e a con$identia+ in$or*ation "nder oath (ith the La( Division

o$ the "rea" o$ Interna+ Reven"e a++ein therein the s'eci$ic vio+ations constit"tin$ra"d-

2. The in$or*ation *"st not #et !e in the 'ossession o$ the "rea" o$ Interna+ Reven"e, orre$er to a case a+read# 'endin or 'revio"s+# investiated !# the "rea" o$ Interna+Reven"e-

3. Mr% Santos sho"+d not !e a overn*ent e*'+o#ee or a re+ative o$ a overn*ente*'+o#ee (ithin the si)th deree o$ consan"init#- and

4. The in$or*ation *"st res"+t to co++ections o$ reven"es andor $ines and 'ena+ties (Sec.+, N)RC'%

Note: TBe tBirt% percent (;#H' rule un9er Sec. "+ (0' of tBe N)RC, tBat is, tBe failure

to report sales, receipts or incoe in an aount e/cee9in@ tBirt% percent (;#H' of tBat9eclare9 per return, an9 a clai of 9e9uctions in an aount e/cee9in@ tBirt% percent(;#H' of actual 9e9uctions, sBall ren9er tBe ta/pa%er lia8le for su8stantialun9er9eclaration of sales, receipts or incoe or for overstateent of 9e9uctions, applies

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onl% for purposes of iposin@ tBe surcBar@e, i.e. twent% five percent (-H' versus fift% percent (-#H'.

or purposes of prescription, i.e., tBe tBree (;' %ear prescriptive perio9 (Sec. #;,N)RC' versus tBe ten (1#' %ear perio9 in case of false or frau9ulent return (Sec. ,N)RC', tBe ;# H rule 9oes not appl%6 intent to 9efrau9 ust still 8e esta8lisBe9.

3. Inder what conditions may the !ommissioner o" -nterna$ even'e &e a'thoried to*a.C !ompromise the payment o" any interna$ reven'e tax? [2000 Bar Exams]

The Co**issioner o$ Interna+ Reven"e *a# !e a"thori.ed to co*'ro*ise the 'a#*ento$ an# interna+ reven"e ta) (here9

1% A reasona!+e do"!t as to the va+idit# o$ the c+ai* aainst the ta)'a#er e)ist- or?% The $inancia+ 'osition o$ the ta)'a#er de*onstrates a c+ear ina!i+it# to 'a# the

assessed ta)% /Revenue Re@ulation No. ;#F#'

&.C /&ate or cance$ a tax $ia&i$ity?

The Co**issioner o$ Interna+ Reven"e *a# a!ate or cance+ a ta) +ia!i+it# (hen91% The ta) or an# 'ortion thereo$ a''ears to !e "n7"st+# or e)cessive+# assessed- or

2. The ad*inistration and co++ection costs invo+ved do not 7"sti$# the co++ection o$ thea*o"nt d"e% 5Sec. #" (0', N)RC of 1&&!

3). #r. eyes% a ,i$ipino citien engaged in the rea$ estate &'siness% "i$ed his 1++ income taxret'rn on #arch 20% 1++. 4n >ecem&er 1% 1++% he $e"t the <hi$ippines as an immigrant to@oin his "ami$y in !anada. /"ter the investigation o" said ret'rn% the B- iss'ed a notice o" de"iciency income tax assessment on /pri$ 1% 1++). #r. eyes ret'rned to the <hi$ippines as a&a$i(&ayan on >ecem&er )% 1++). ,inding his name to &e in the $ist o" de$in8'ent taxpayers% he"i$ed a protest against the assessment on the gro'nd that he did not receive the notice o" assessment and that the assessment had prescri&ed. Wi$$ the protest prosper? Exp$ain. [2000Bar Exams]

No% Prescri'tion has not set in !eca"se the 'eriod o$ +i*itations $or the "rea" o$ Interna+ reven"e to iss"e an assess*ent (as s"s'ended d"rin the ti*e that Mr% Re#es (aso"t o$ the Phi+i''ines or $ro* the 'eriod Dece*!er 10, 10 "' to Dece*!er , 1%(Section ; in relation to Section #;, N)RC'

3+. / !o.% a <hi$ippine !orporation% "i$ed its 1++ -ncome ax et'rn -C on /pri$ 1% 1++9 showinga net $oss. 4n Hovem&er 10% 1++9% it amended its 1++ - to show more $osses. /"ter a taxinvestigation% the B- disa$$owed certain ded'ctions c$aimed &y / !o.% p'tting / !o. in a netincome position. /s a res'$t% on /'g'st % 1+++% the B- iss'ed a de"iciency income assessment

against / !o. / !o. protested the assessment on the gro'nd that it has prescri&ed. >ecide.[1+++ Bar Exams]

The riht o$ the IR to assess the ta) has not 'rescri!ed% The r"+e is that interna+Reven"e ta)es sha++ !e assessed (ithin three #ears a$ter the +ast da# 'rescri!ed !# +a( $orthe $i+in o$ the ret"rn% (Section #;, N)RC'. o(ever, i$ the ret"rn oriina++# $i+ed isa*ended s"!stantia++#, the co"ntin o$ the three #ear 'eriod starts $ro* the date thea*ended ret"rn (as $i+ed. (C)R vs. PBoeni/ Assurance Co., 1" SCRA -'. There iss"!stantia+ a*end*ent in this case !eca"se a ne( ret"rn (as $i+ed dec+arin *ore +osses,(hich can on+# !e done either /15 in red"cin ross inco*e or /?5 in increasin the ite*s o$ ded"ctions, c+ai*ed%

0. / !o.% a <hi$ippine corporation% received an income tax de"iciency assessment "rom the B- on

#ay % 1++. 4n #ay 31% 1++% / !o. "i$ed its protest with the B-. 4n ='$y 30% 1++% / !o.s'&mitted to the B- a$$ re$evant s'pporting doc'ments. he !- did not "orma$$y r'$e on theprotest &'t on =an'ary 2% 1++9% / !o. was served a s'mmons and a copy o" the comp$aint "orco$$ection o" the tax de"iciency "i$ed &y the B- with the egiona$ ria$ !o'rt !C. 4n

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,e&r'ary 20% 1++9% / !o. &ro'ght a <etition "or review &e"ore the !/. he B- contended thatthe <etition is premat're since there was no "orma$ denia$ o" the protest o" / !o. and sho'$dthere"ore &e dismissed. [1+++ Bar Exams]

aC >oes the !/ have @'risdiction over the case?

Yes, the CTA has 7"risdiction over the case !eca"se this 6"a+i$ies as an a''ea+ $ro* theCo**issioner=s decision on dis'"ted assess*ent% &hen the Co**issioner decided toco++ect the ta) assessed (itho"t $irst decidin on the ta)'a#er=s 'rotest, the e$$ect o$ theCo**issioner=s action o$ $i+in a 7"dicia+ action $or co++ection is a decision o$ denia+ o$ the'rotest, in (hich event the ta)'a#er *a# $i+e an a''ea+ (ith the CTA% (Repu8lic vs. LiTian Ten@ 7 Sons, )nc. 1* SCRA -+"6 2a%rit vs. CruI. LF;&&1#. Sept. *, 1&&+'

&C >oes the ! have @'risdiction over the co$$ection case "i$ed &y the B-? Exp$ain.

The RTC has no 7"risdiction over the co++ection case $i+ed !# the IR% The $i+in o$ ana''ea+ (ith the CTA has the e$$ect o$ divestin the RTC o$ 7"risdiction over the co++ectioncase% At the *o*ent the ta)'a#er a''ea+s the case to the CTA in vie( o$ the

Co**issioner=s $i+in o$ the co++ection case (ith the RTC (hich (as considered as adecision o$ denia+, it ives a 7"sti$ia!+e !asis $or the ta)'a#er to *ove $or dis*issa+ in theRTC o$ the overn*ent=s action to co++ect the ta) +ia!i+it# "nder dis'"te% (<a8es vs. loo.1- SCRA !+6 San $uan vs. asJueI. ; SCRA &'% There is no $ina+, e)ec"tor# andde*anda!+e assess*ent (hich can !e en$orced !# the IR, once a ti*e+# a''ea+ is $i+ed%

1. / !o.% a <hi$ippine corporation received an income tax de"iciency assessment "rom the B- onHovem&er 2% 1++9. 4n >ecem&er 10% 1++9% / !o. "i$ed its protest with the B-. 4n #ay 20%1++% the B- iss'ed a warrant o" distraint to en"orce the assessment. his warrant was servedon / !o. on #ay 2% 1++. -n a $etter dated ='ne % 1++ and received &y / !o. "ive days $ater%the !- "orma$$y denied / !o.s protest stating that it constit'tes his "ina$ decision on thematter. 4n ='$y 9% 1++% / !o. "i$ed a <etition "or eview with !/. he B- moved to dismissthe <etition on the gro'nd that the !/ has no @'risdiction over the case. >ecide. [1+++ Bar

Exams]

The CTA has 7"risdiction over the case% The a''ea+a!+e decision is the one (hichcateorica++# stated that the Co**issioner=s action on the dis'"ted assess*ent is $ina+ and,there$ore, the rec8onin o$ the @4 da# 'eriod to a''ea+ (as on 2"ne , 1% The $i+in o$ the 'etition $or revie( (ith the CTA (as ti*e+# *ade% The S"'re*e Co"rt has r"+ed thatthe CIR *"st cateorica++# state that his action on a dis'"ted assess*ent is $ina+- other(ise,the 'eriod to a''ea+ (i++ not co**ence to r"n% That $ina+ action cannot !e i*'+ied $ro*the *ere iss"ance o$ a (arrant o$ distraint and +ev#% (C)R vs. Union SBippin@ Corp. 1+-SCRA -"!'

2. / !o. is the who$$y owned s'&sidiary o" B !o.% a nonFresident Jerman company. / !o. has atrademar( $icensing agreement with B !o. 4n ,e&. 10% 1++% / !o. remitted to B !o. roya$tieso" <hp 10 mi$$ion% which / !o. s'&@ected to a W o" 2 or <hp 2%00%000. Ipon advice o" co'nse$% / !o. rea$ied that the proper W rate is 10. 4n #arch 20% 1++9% / !o. "i$ed a c$aim"or re"'nd o" <2% 00% 000 with the B-. he B- denied the c$aim on Hov. 1% 1++9. 4n Hov.2)% 1++9% / !o. "i$ed a <etition "or eview with the !/. he B- attac(ed the capacity o" /!o.% as agent% to &ring the re"'nd case. >ecide the iss'e. [1+++ Bar Exams]

A Co%, the (ithho+din aent o$ the nonBresident $orein cor'oration is entit+ed to c+ai*$or re$"nd o$ e)cess (ithho+din ta) 'aid on the inco*e o$ said cor'oration in thePhi+i''ines% ein a (ithho+din aent, it is the one he+d +ia!+e $or an# vio+ation o$ the(ithho+din ta) +a( sho"+d s"ch a vio+ation occ"r% In the sa*e vein, it sho"+d !e a++o(ed toc+ai* a re$"nd in case o$ over(ithho+din% (C)R vs. 4an9er PBils. 1*# SCRA -!;6 C)R vs.Procter an9 Ga8le P=C. #" SCRA ;!!'

3. -s assessment necessary &e"ore a taxpayer may &e prosec'ted "or wi$$"'$$y attempting in anymanner to evade or de"eat any tax imposed &y the -nterna$ even'e !ode? [1++) Bar Exams]

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No% Assess*ent is not necessar# !e$ore a ta)'a#er *a#!e 'rosec"ted i$ there is a'ri*a $acie sho(in o$ a (i++$"+ atte*'t to evade ta)es as in the ta)'a#er=s $ai+"re to

dec+are a s'eci$ic ite* o$ ta)a!+e inco*e in his inco*e ta) ret"rns . (Un@a8 vs. Cusi. &! SCRA +!!'. On the contrar#, i$ the ta)es a++eed to have !een evaded is co*'"ted !ased onre'orts a''roved !# the IR there is a 'res"*'tion o$ re"+arit# o$ the 'revio"s 'a#*ent o$ ta)es, so that "n+ess and "nti+ the IR has *ade a $ina+ deter*ination o$ (hat is s"''osedto !e the correct ta)es, the ta)'a#er sho"+d not !e '+aced in the cr"ci!+e o$ cri*ina+'rosec"tion. (C)R vs. ortune To8acco Corp. GR No. 11&;. $une ", 1&&*'

. / corporation "i$es its income tax ret'rn on a ca$endar year &asis. ,or the "irst 8'arter o" 1++3%it paid on 30 #ay 1++3 its 8'arter$y income tax in the amo'nt o" <hp 3 mi$$ion. 4n 20 /'g'st1++3% it paid the second 8'arter$y income tax o" <hp 0. mi$$ion. he third 8'arter res'$ted ina net $oss% and no tax was paid. ,or the "o'rth and "ina$ ret'rn "or 1++3% the company reporteda net $oss "or the year% and the taxpayer indicated in the income tax ret'rn that it opted toc$aim a re"'nd o" the 8'arter$y tax payments.

4n 10 =an'ary 1++% the corporation "i$ed with the B- a written c$aim "or the re"'nd o" <hp3. mi$$ion.

B- "ai$ed to act on the c$aim "or re"'ndO hence% on 02 #arch 1++9% the corporation "i$ed apetition "or review with the !/ on its c$aim "or re"'nd o" the overpayment o" its 1++38'arter$y income tax. B-% in its answer to the petition% a$$eged that the c$aim "or re"'nd was"i$ed &eyond the reg$ementary period.

>id the c$aim "or re"'nd prescri&e? [1++ Bar Exams]

The c+ai* $or re$"nd has 'rescri!ed% The co"ntin o$ the t(o #ear 'rescri'tive 'eriod$or $i+in a c+ai* $or re$"nd is co"nted not $ro* the date (hen the 6"arter+# inco*e ta)es(ere 'aid !"t on the date (hen the $ina+ ad7"st*ent ret"rn (as $i+ed% (C)R vs. T=K Sales,)nc. GR No. +;!;*. $an. 1-, 1&&6 C)R vs. PBilA Life )nsurance Co., )nc.. GR No. 1#-#+.

=a% &, 1&&-'% It is o!vio"s that the ann"a+ inco*e ta) ret"rn (as $i+ed !e$ore 2an"ar#14, 13 !eca"se the (ritten c+ai* $or re$"nd (as $i+ed (ith the IR on 2an"ar# 14, 13%Since the t(o #ear 'rescri'tive 'eriod is not on+# a +i*itation o$ action $or !rinin the caseto the 7"dicia+ stae, the 'etition $or revie( $i+ed (ith the CTA on March 4?, 1G is !e#ondthe re+e*entar# 'eriod%

Note: or AT refun9s, tBe countin@ of tBe two %ear prescriptive perio9 is counte9 fro tBe close of tBe ta/a8le Juarter (Sec. 11, N)RC'

. / taxpayer received% on 1 =an'ary 1++9% an assessment "or an interna$ reven'e tax de"iciency.4n 10 ,e&r'ary 1++9% the taxpayer "orthwith "i$ed a petition "or review with the !/. !o'$dthe ax !o'rt entertain the petition? [1++ Bar Exams]

No% e$ore a ta)'a#er can avai+ o$ 7"dicia+ re*ed# he *"st $irst e)ha"st ad*inistrativere*edies !# $i+in a 'rotest (ithin @4 da#s $ro* recei't o$ the assess*ent% It is theCo**issioner=s decision on the 'rotest that ive the Ta) Co"rt 7"risdiction over the case'rovided that the a''ea+ is $i+ed (ithin @4 da#s $ro* recei't o$ the Co**issioner=sdecision% An assess*ent !# the IR is not the Co**issioner=s decision $ro* (hich a'etition $or revie( *a# !e $i+ed (ith the CTA% Rather, it is the action ta8en !# theCo**issioner in res'onse to the ta)'a#er=s 'rotest on the assess*ent that (o"+dconstit"te the a''ea+a!+e decision% (Section !, RA No. 11-'

Local Governent Co9e

9. :% a taxpayer who &e$ieves that an ordinance passed &y the !ity !o'nci$ o" <asay is 'nconstit'tiona$ "or &eing discriminatory against him% wants to (now "rom yo'% his tax

$awyer% whether or not he can "i$e an appea$. -n the a""irmative% he as(s yo' where s'chappea$ sho'$d &e made* the Secretary o" ,inance% or the Secretary o" ='stice% or the !o'rt o" ax /ppea$s% or the reg'$ar co'rts. What wo'$d yo'r advice &e to yo'r c$ient% :? [2003 BarExams]

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The a''ea+ sho"+d !e *ade (ith the Secretar# o$ 2"stice% An# 6"estion on theconstit"tiona+it# or +ea+it# o$ a ta) ordinance *a# !e raised on a''ea+ (ith the Secretar# o$ 2"stice (ithin @4 da#s $ro* the e$$ectivit# thereo$% (Section 1+!, LGC6 Ea@ono% =ar>et

en9or Association vs. =unicipalit% of Ea@ono%. ;!* SCRA ;!*'

. Inder /rt. 1 o" the !ivi$ !ode% in order "or machinery and e8'ipment to &e consideredrea$ property% they m'st &e p$aced &y the owner o" the $and and in addition% m'st tend todirect$y meet the needs o" the ind'stry or wor(s carried on the owner. 4i$ companies s'ch as!a$tex and She$$% insta$$ 'ndergro'nd tan(s in the gaso$ine station $ocated on $and $eased &ythese companies "rom others. /re those 'ndergro'nd tan(s which were not p$aced &y the ownero" the $and &'t were instead p$aced there &y the $essee o" the $and% considered rea$ property"or p'rposes o" rea$ property taxation 'nder the GJ!? Exp$ain. [2001 P 2003 Bar Exams]

Yes% The "nderro"nd tan8s a+tho"h insta++ed !# the +essee, She++ and Ca+te), areconsidered rea+ 'ro'ert# $or '"r'oses o$ the i*'osition o$ the rea+ 'ro'ert# ta)es% It is on+#$or '"r'oses o$ e)ec"tin a $ina+ 7"d*ent that these *achiner# and e6"i'*ent, insta++ed

!# the +essee on a +eased +and, (o"+d not !e considered as rea+ 'ro'ert#% "t in thei*'osition o$ the rea+ 'ro'ert# ta), the "nderro"nd tan8s are ta)a!+e as necessar#$i)t"res o$ the aso+ine station (itho"t (hich the aso+ine station (o"+d not !e o'erationa+%/Calte/ PBils. )nc. vs C0AA. 11" SCRA &*5

). he rea$ property o" #r. and #rs. /nge$es% sit'ated in a commercia$ area in "ronto" the p'&$ic #ar(et% was dec$ared in their ax >ec$aration as residentia$ &eca'se it had&een 'sed &y them as their "ami$y residence "rom the time o" its constr'ction in 1++0.Aowever% since =an'ary 1++% when the spo'ses $e"t "or the Inited States to stay therepermanent$y with their chi$dren% the property has &een rented to a sing$e proprietorengaged in the sa$e o" app$iances and agriFprod'cts. he <rovincia$ /ssessor rec$assi"ied theproperty as commercia$ "or tax p'rposes starting =an'ary 1++). #r. and #rs. /nge$esappea$ed to the Goca$ Board o" /ssessment /ppea$s contending that the ax >ec$aration

previo's$y c$assi"ying their property as residentia$ is &inding.Aow sho'$d the appea$ &e decided? [2002 Bar Exams]

The a''ea+ sho"+d !e decided aainst Mr% and Mrs% Ane+es% The +a( $oc"ses on the act"a+ "seo$ the 'ro'ert# $or c+assi$ication, va+"ation and assess*ent '"r'oses reard+ess o$ o(nershi'%Section ?1 o$ the Loca+ overn*ent Code 'rovides that rea+ 'ro'ert#, sha++ !e c+assi$ied,va+"ed, and assessed on the !asis o$ its act"a+ "se reard+ess o$ (here +ocated, (hoever o(ns it,and (hoever "ses it%

+. /side "rom the &asic rea$ estate tax% give three other taxes that may&e imposed &yprovincia$ and city government as we$$ as &y m'nicipa$ities in the #etro #ani$a area? [2002 BarExams]

The $o++o(in rea+ 'ro'ert# ta)es area aside $ro* the !asic rea+ 'ro'ert# ta), *a# !ei*'osed !# 'rovincia+ and cit# overn*ent as (e++ as !# *"nici'a+ities in the Metro Mani+aarea9

a% Additiona+ +ev# on rea+ 'ro'ert# $or the S'ecia+ Ed"cation F"nd /Sec%?@0,LC5-

!% Additiona+ AdBva+ore* ta) on id+e +ands /Sec%?@G, LC5-c% S'ecia+ Lev# /SEC%?345%

A+ternative Ans(er9A% The $o++o(in ta)es, aside $ro* the !asic rea+ estate ta) *a# !e i*'osed !#9

1% Cit#Provincia+ overn*enta5 Printer=s or '"!+isher=s ta)

!5 Franchise ta)c5 Pro$essiona+ ta)?% M"nici'a+ities in the Metro Mani+a area

a5 Ann"a+ $i)ed ta) on *an"$act"rers, asse*!+ers, re'ac8ers, 'rocessors,!re(ers, disti++ers, recti$iers, and co*'o"nders o$ +i6"ors, disti++ed s'irits

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and (ines or *an"$act"re o$ an# artic+e o$ co**erce o$ (hatever 8ind ornat"re-

!5 Ann"a+ $i)ed ta) on (ho+esa+ers, distri!"tors, or dea+ers in an# artic+e o$ co**erce o$ (hatever 8ind or nat"re-

c5 Percentae ta) on retai+ers%

0. / !o.% a <hi$ippine corporation% is the owner o" machinery% e8'ipment and "ixt'res $ocatedat its p$ant in #'ntin$'pa !ity. he !ity /ssessor characteried a$$ these properties as rea$properties s'&@ect to the rea$ property tax. / !o. appea$ed the matter to the #'ntin$'pa Boardo" /ssessment /ppea$s. he Board r'$ed in "avor o" the !ity. -n accordance with / Ho. 112% /!o. &ro'ght a petition "or review &e"ore the !/ to appea$ the decision o" the !ity Board o" /ssessment /ppea$s.

-s the <etition "or eview proper? Exp$ain. [1+++ Bar Exams]

No% The CTA is devoid o$ 7"risdiction to entertain a''ea+s $ro* the decision o$ the Cit#

oard o$ Assess*ent A''ea+s% Said decision is instead a''ea+a!+e to the Centra+ oard o$ Assess*ent A''ea+s, (hich "nder the Loca+ overn*ent Code, has a''e++ate 7"risdictionover decisions o$ Loca+ oard o$ Assess*ent A''ea+s% (Calte/ PBils. )nc. vs. Central 0oar9 of Assessent Appeals. LF-#"**. =a% ;1, 1&+'

Note: Un9er tBe new CTA law, RA No. &+ wBicB aen9e9 RA No. 11-, 9ecisions of tBe Central 0oar9 of Assessent Appeals are now appeala8le to tBe Court of Ta/ Appealsan9 no lon@er to tBe Court of Appeals.

1. he #'nicipa$ity o" #a$o$os passed an ordinance imposing a tax on any sa$e or trans"er o" rea$ property $ocated within the m'nicipa$ity at a rate o" oneF"o'rth 1MC o" one percent'm1C o" the tota$ consideration o" s'ch transaction. : so$d a parce$ o" $and in #a$o$os which heinherited "rom his deceased parents and re"'sed to pay the a"oresaid tax. Ae instead "i$ed

appropriate case as(ing that the ordinance &e dec$ared n'$$ and void since s'ch a tax can on$y&e co$$ected &y the nationa$ government% as in "act he has paid B- the re8'ired capita$ gainstax. he m'nicipa$ity co'ntered that 'nder the constit'tion% each $oca$ government is vestedwith the power to create its own so'rces o" reven'e and to $evy taxes% and it imposed thes'&@ect tax in the exercise o" said constit'tiona$ a'thority.

eso$ve the controversy. [1++2 Bar Exams]

The ordinance 'assed !# the M"nici'a+it# o$ Ma+o+os i*'osin a ta) on the sa+e ortrans$er o$ rea+ 'ro'ert# is void% The Loca+ Ta) Code on+# a++o(s 'rovinces and cities toi*'ose Ta) on the trans$er o$ o(nershi' o$ rea+ 'ro'ert#% (Sec ! an9 ;, Local Ta/ Co9e'%M"nici'a+ities are 'rohi!ited $ro* i*'osin said ta) that 'rovinces are s'eci$ica++#a"thori.ed to +ev# (Sec. , Local Ta/ Co9e'

&hi+e it is tr"e that the Constit"tion has iven !road 'o(ers o$ ta)ation to +oca+overn*ent "nits, this de+eation ho(ever, is s"!7ect to s"ch +i*itations as *a# !e'rovided !# +a(% (Sec -, Art K, 1&+! Constitution'

Tariff an9 Custos Co9e

2. : and his wi"e% D% ,i$ipinos $iving in the <hi$ippines% went on a threeFmonth p$eas're triparo'nd the wor$d d'ring the months o" ='ne% ='$y and /'g'st 2002. -n the co'rse o" their trip%they acc'm'$ated some persona$ e""ects which were necessary% appropriate and norma$$y 'sedin $eis're trips% as we$$ as so'venirs in nonFcommercia$ 8'antities. /re they 5ret'rningresidents6 "or p'rposes o" Section 10 o" the ari"" and !'stoms !ode? Exp$ain. [2003 BarExams]

No% The ter* :ret"rnin residents< re$ers to nationa+s (ho have sta#ed in a $orein

co"ntr# $or a 'eriod o$ at +east si) /G5 *onths% /Section 140/$5 o$ the Tari$$ and C"sto*sCode5% D"e to their +i*ited d"ration o$ sta# a!road > and Y are not considered as :ret"rninresidents< !"t the# are *ere+# considered as trave+ers or to"rists (ho en7o# the !ene$it o$ conditiona++# $ree i*'ortation%

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JNote9 Credit *"st +i8e(ise !e iven i$ the ans(ers is in the a$$ir*ative, considerinthat trave+ers or to"rists are iven the sa*e ta) treat*ent as that o$ ret"rnin residents,treatin their 'ersona+ e$$ects, not in co**ercia+ 6"antities, as conditiona++# $ree

i*'ortation%

3. Whenever the decision o" the !o$$ector o" !'stoms is adverse to the government% it isa'tomatica$$y e$evated to the !ommissioner "or review% and i" it is a""irmed &y him% it isa'tomatica$$y e$evated to the Secretary o" ,inance "or review.

What is the &asis o" the a'tomatic review proced're in the B'rea' o" !'stoms? Exp$ain.[2002 Bar Exams]

A"to*atic revie( is intended to 'rotect the interest o$ the overn*ent in theco++ection o$ ta)es and c"sto*s d"ties in sei."re and 'rotest cases% &itho"t s"ch a"to*aticrevie(, neither the Co**issioner o$ C"sto*s nor the Secretar# o$ Finance (o"+d 8no(a!o"t the decision +aid do(n !# the Co++ector $avorin the ta)'a#er% The 'o(er to decidesei."re and 'rotest cases *a# !e a!"sed i$ no chec8s are instit"ted% A"to*atic revie( is

necessar# !eca"se no!od# is e)'ected to a''ea+ the decision o$ the Co++ector (hich is$avora!+e to the ta)'a#er and adverse to the overn*ent% This is the reason (h#(henever the decision o$ the Co++ector is adverse to the overn*ent, the said decision isa"to*atica++# e+evated to the Co**issioner $or revie(- and i$ s"ch decision is a$$ir*ed !#the Co**issioner, the sa*e sha++ !e a"to*atica++# e+evated to and !e $ina++# revie(ed !#the Secretar# o$ Finance /<ao>asin vs. Coissioner of Custos. 1+# SCRA -&1. 1&+&5

. 4n the &asis o" a warrant o" sei're and detention iss'ed &y the !o$$ector o" !'stoms "orthe p'rpose o" en"orcing the ari"" and !'stoms Gaws% assorted &rands o" cigarettes said tohave &een i$$ega$$y imported into the <hi$ippines were seied "rom a store where they wereopen$y o""ered "or sa$e. >issatis"ied with the decision rendered a"ter hearing &y the !o$$ectoro" !'stoms on the con"iscation o" the artic$es% the importer "i$ed a petition "or review with the!o'rt o" ax /ppea$s. he !o$$ector moved to dismiss the petition "or $ac( o" @'risdiction. '$e

on the motion. [2000 Bar Exams]

Motion ranted% The Co"rt o$ Ta) A''ea+s has 7"risdiction on+# over decisions o$ theCo**issioner o$ C"sto*s in cases invo+vin sei."res, detention or re+ease o$ 'ro'ert#a$$ected% (Section !, RA No. 11-'. There is no decision #et o$ the Co**issioner (hich iss"!7ect to revie( !# the Co"rt o$ Ta) A''ea+s%

. Inder the same "acts a&ove% co'$d the importer "i$e an action in the egiona$ ria$ !o'rt "orrep$evin on the gro'nd that the artic$es are &eing wrong"'$$y detained &y the !o$$ector o" !'stoms since the importation was not i$$ega$ and there"ore exempt "rom sei're? [2000 BarExams]

No% The +eis+ators intended to divest the Reiona+ Tria+ Co"rts o$ the 7"risdiction tore'+evin a 'ro'ert# (hich is a s"!7ect o$ sei."re and $or$eit"re 'roceedins $or vio+ation o$ the Tari$$ and C"sto*s Code other(ise, actions $or $or$eit"re o$ 'ro'ert# $or vio+ation o$ the C"sto*s +a(s co"+d easi+# !e "nder*ined !# the si*'+e device o$ re'+evin% (2e Lauente vs. 2e e%ra, et al. 1# SCRA "--'

There sho"+d !e no "nnecessar# hindrance on the overn*ent=s drive to 'revents*"+in and other $ra"ds "'on the C"sto*s% F"rther*ore, the Reiona+ Tria+ Co"rt do nothave 7"risdiction in order to render e$$ective and e$$icient the co++ection o$ i*'ort ande)'ort d"ties d"e the State, (hich ena!+es the overn*ent to carr# o"t the $"nctions it has!een instit"ted to 'er$or*% ($ao, et al vs. Court of Appeals, et al., an9 copanion case."& SCRA ;-, ";'

Note: TBe Secretar% of tBe 2epartent of Tra9e an9 )n9ustr% in case of nonF

a@ricultural pro9ucts or tBe Secretar% of tBe 2epartent of A@riculture in tBe case of a@ricultural pro9ucts sBall appl% a @eneral safe@uar9 easure upon a positive final9eterination of tBe Tariff Coission tBat a pro9uct is 8ein@ iporte9 into tBe countr% in increase9 Juantities, wBetBer a8solute or relative to tBe 9oestic pro9uction, as to 8ea su8stantial cause of serious inur% or tBreat tBereof to tBe 9oestic in9ustr%. TBe

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liitation a% ta>e in tBe for of an% a99itional 9ut% wBicB a% 8e specific an9or a9 valore, or a Juantitative restriction. (RA No. ++##, Safe@uar9 =easures Act'

9. -n sm'gg$ing a shipment o" gar$ic% the sm'gg$ers 'sed an eightFwhee$er tr'c( which theyhired "or the p'rpose o" ta(ing o't the shipment "rom the c'stoms one. >anny% the tr'c(owner% did not have a certi"icate o" p'&$ic convenience to operate his tr'c(ing &'siness. >annydid not (now that the shipment o" gar$ic was i$$ega$$y imported.

!an the co$$ector o" c'stoms o" the port seie and "or"eit the tr'c( as an instr'ment in thesm'gg$ing? [1++ Bar Exams]

Yes, the Co++ector o$ C"sto*s o$ the 'ort can sei.e and $or$eit the tr"c8 as aninstr"*ent in the s*"+in activit#, since the sa*e (as "sed "n+a($"++# in the i*'ortationo$ s*"+ed artic+es% The *ere carr#in o$ s"ch artic+es on !oard the tr"c8 /in co**ercia+6"antities5 sha++ s"!7ect the tr"c8 to $or$eit"re, since it (as not !ein "sed as a d"+#a"thori.ed co**on carrier, (hich (as chartered or +eased as s"ch% /Sec. -;# 5a TCC'

Moreover, a+tho"h $or$eit"re o$ the vehic+e (i++ not !e e$$ected i$ it is esta!+ished thatthe o(ner thereo$ had no 8no(+ede o$ or 'artici'ation in the "n+a($"+ acts, there arises a'ri*a $acie 'res"*'tion o$ 8no(+ede or 'artici'ation i$ the o(ner is not in the !"siness$or (hich the conve#ance is enera++# "sed% Th"s, not havin a certi$icate o$ '"!+icconvenience to o'erate a tr"c8in !"siness, he is +ea++# dee*ed not to have !eenenaed in the tr"c8in !"siness% /Sec -;1, Tariff an9 Custos Co9e'

AR TYPE QUESTIONS

I% he Sangg'niang Bayan o" #a(ati enacted #'nicipa$% 4rdinance Ho. +2F02 which provides%inter a$ia% "or the sched'$e o" rea$ estate% &'siness and "ranchise taxes in the #'nicipa$ity o" #a(ati. herea"ter% the >epartment o" ='stice came o't with a reso$'tion a"ter an appea$ "rom ataxpayer% dec$aring Qn'$$ and void and witho't $ega$ e""ectQ the said ordinance "or having &eenenacted in contravention o" Section 1) o" the Goca$ Jovernment !ode o" 1++1. #a(ati there&y "i$ea petition with the ! o" #a(ati. -n the meantime% #a(ati contin'ed to imp$ement the ordinance.=ardine >avies -ns'rance Bro(ers% -nc.% a d'$yForganied corporation% was assessed and &i$$ed &y#a(ati an amo'nt "or taxes% "ees and charges. <etitioner did not protest the assessment &'t in "act%paid the said amo'nts witho't any protest.

he ! rendered @'dgment dec$aring the ordinance va$id. =ardine >avies% re$ying on thereso$'tion o" the >4=% "i$ed a comp$aint with the ! o" #a(ati against #a(ati and its /cting

#'nicipa$ reas'rer "or a re"'nd or tax credit. he de"endants "i$ed a motion to dismiss thecomp$aint on the gro'nd o" premat'rity.

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-s =ardine >avies proscri&ed "rom "i$ing its comp$aint with the ! "or a re"'nd o" thea$$eged payment witho't any protest o" the taxes d'e and witho't any appea$ with the Secretary o" ='stice as to $ega$ity or constit'tiona$ity o" the ordinance?

YES% As a enera+ 'rece't, a ta)'a#er *a# $i+e a co*'+aint assai+in the va+idit# o$ theordinance and 'ra#in $or a re$"nd o$ its 'erceived over'a#*ents (itho"t $irst $i+in a 'rotestto the 'a#*ent o$ ta)es d"e "nder the ordinance%

As he+d in the case o$ Re%es vs. Court of Appeals /@?4 SCRA 3G% 15,:C+ear+#, the +a( re6"ires that the dissatis$ied ta)'a#er (ho 6"estions the va+idit# or

+ea+it# o$ a ta) ordinance *"st $i+e his a''ea+ to the Secretar# o$ 2"stice, (ithin @4 da#s $ro*e$$ectivit# thereo$% In case the Secretar# decides the a''ea+, a 'eriod a+so o$ @4 da#s is a++o(ed$or an arieved 'art# to o to co"rt% "t i$ the Secretar# does not act thereon, a$ter the +a'seo$ G4 da#s, a 'art# co"+d a+read# 'roceed to see8 re+ie$ in co"rt% These three se'arate 'eriodsare c+ear+# iven $or co*'+iance as a 'rere6"isite !e$ore see8in redress in a co*'etent co"rt%S"ch stat"tor# 'eriods are set to 'revent de+a#s as (e++ as enhance the order+# and s'eed#dischare o$ 7"dicia+ $"nctions% For this reason the co"rts constr"e these 'rovisions o$ stat"tesas *andator#%<

In the instant case, the $ai+"re o$ 2ardine Davies to a''ea+ to the Secretar# o$ 2"stice(ithin @4 da#s as re6"ired !# Sec% 1 o$ R%A% 1G4 is $ata+ to their ca"se% Moreover, 2ardineDavies even 'aid (itho"t an# 'rotest the a*o"nts o$ ta)es assessed !# res'ondents Ma8ati andActin Treas"rer as 'rovided $or in the ordinance% / $ar9ine 2avies )nsurance 0ro>ers, )nc. vs.

Aliposa. G.R. No. 11+&##6 e8ruar% !, ##;5

II% G'ng !enter o" the <hi$ippines is a nonFpro"it and nonFstoc( corporation which wasorganied "or the we$"are and &ene"it o" the ,i$ipino peop$e principa$$y to he$p com&at the highincidence o" $'ng and p'$monary diseases in the <hi$ippines. -ts medica$ services are to &e renderedto the p'&$ic in genera$. -t accepts paying and nonFpaying patients% inc$'ding o'tFpatients. -t a$soreceives ann'a$ s'&sidies "rom the government.

-t owns o" a parce$ o" $and with a hospita$ in the midd$e% $ocated at ;'eon !ity. / &ig spaceat the gro'nd "$oor is &eing $eased to private parties% "or canteen and sma$$ store spaces% and to

medica$ or pro"essiona$ practitioners who 'se the same as their private c$inics. / &ig portion o" the$and is &eing $eased "or commercia$ p'rposes to a private enterprise. Both the $and and the hospita$&'i$ding were assessed "or rea$ property taxes. here&y the entity "i$ed a !$aim "or Exemption "romrea$ property taxes with the !ity /ssessor% predicated on its c$aim that it is a charita&$e instit'tion.

1. -s the G'ng !enter o" the <hi$ippines a charita&$e instit'tion?2. /re its rea$ properties exempt "rom rea$ property taxes?

1% YES% As a enera+ 'rinci'+e, a charita!+e instit"tion does not +ose its character as s"chand its e)e*'tion $ro* ta)es si*'+# !eca"se it derives inco*e $ro* 'a#in 'atients, (hethero"tB'atient, or con$ined in the hos'ita+, or receives s"!sidies $ro* the overn*ent, so +on asthe *one# received is devoted or "sed a+toether to the charita!+e o!7ect (hich it is intendedto achieve- and no *one# in"res to the 'rivate !ene$it o$ the 'ersons *anain or o'eratinthe instit"tion%

The $"nda*enta+ ro"nd "'on (hich a++ e)e*'tions in $avor o$ charita!+e instit"tionsare !ased is the !ene$it con$erred "'on the '"!+ic !# the*, and a conse6"ent re+ie$, to so*ee)tent, o$ the !"rden "'on the state to care $or and advance the interests o$ its citi.ens%

?% NO% Even tho"h the 'etitioner is a charita!+e instit"tion, those 'ortions o$ its rea+'ro'ert# that are +eased to 'rivate entities are not e)e*'t $ro* rea+ 'ro'ert# ta)es as theseare not act"a++#, direct+# and e)c+"sive+# "sed $or charita!+e '"r'oses%

The sett+ed r"+e in this 7"risdiction is that +a(s rantin e)e*'tion $ro* ta) areconstr"ed strictissii uris aainst the ta)'a#er and +i!era++# in $avor o$ the ta)in 'o(er%Ta)ation is the r"+e and e)e*'tion is the e)ce'tion%

The ta) e)e*'tion "nder Section ?/@5, Artic+e I o$ the 1 Phi+i''ine Constit"tion

covers 'ro'ert# ta)es on+#% &hat is e)e*'ted is not the instit"tion itse+$- those e)e*'ted $ro*rea+ estate ta)es are +ands, !"i+dins and i*'rove*ents act"a++#, direct+# and e)c+"sive+# "sed$or re+iio"s, charita!+e or ed"cationa+ '"r'oses%

Under the 1@ and 1 Constit"tions and Re'% Act No% 1G4 in order to !e entit+ed tothe e)e*'tion, the 'etitioner is !"rdened to 'rove, !# c+ear and "ne6"ivoca+ 'roo$, that /a5 it

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is a charita!+e instit"tion- and /!5 its rea+ 'ro'erties are ACTUALLY, DIRECTLY and E>CLUSIELY"sed $or charita!+e '"r'oses% I$ rea+ 'ro'ert# is "sed $or one or *ore co**ercia+ '"r'oses, it is

not e)c+"sive+# "sed $or the e)e*'ted '"r'oses !"t is s"!7ect to ta)ation% The (ordsdo*inant "se or 'rinci'a+ "se cannot !e s"!stit"ted $or the (ords "sed e)c+"sive+#(itho"t doin vio+ence to the Constit"tions and the +a(% /Lun@ Center of tBe PBilippines vs.ueIon Cit% an9 Rosas. G.R. No. 1""1#". $une &, ##"%5

III% #E/G!4 "i$ed its tax dec$arations covering its S'cat power p$ants% inc$'ding the &'i$dingsthereon as we$$ as the machineries and e8'ipment. ,rom 1++ to 1++)% #E/G!4 paid the rea$property taxes on the said properties on the &asis o" their assessed va$'e as stated in its taxdec$arations. herea"ter% #E/G!4 so$d a$$ the powerFgenerating p$ants inc$'ding the $andsite tothe H/<4!4.

-n 200% the #'nicipa$ /ssessor o" #'ntin$'pa discovered that #E/G!4% "or the years 1++9F1++)% misdec$ared andMor "ai$ed to dec$are "or taxation p'rposes a n'm&er o" rea$ propertiesconsisting o" severa$ e8'ipment and machineries "o'nd in the said power p$ants. herea"ter% the

#'nicipa$ reas'rer o" #'ntin$'pa iss'ed three notices to #E/G!4% re8'esting it to pay the "'$$amo'nt o" the c$aimed de"iciency with a warning that its properties co'$d &e so$d at p'&$ic a'ction'n$ess the tax d'e was paid. Sti$$% #E/G!4 did not pay% nor ta(e other steps.

#E/G!4 "i$ed &e"ore the ! o" #a(ati a <etition "or <rohi&ition en@oining the #'nicipa$reas'rer o" #'ntin$'pa "rom en"orcing the warrants o" garnishment. he #'nicipa$ reas'rer "i$eda #otion to >ismiss on gro'nd o" $ac( o" @'risdiction.

1. -s #E/G!4 $ia&$e "or the de"iciency in rea$ property taxes "or the years 1++9F1++)?2. /re the $etters sent to the #E/G!4 &y the m'nicipa$ treas'rer mere co$$ection $etters or

notices o" assessment?3. Wi$$ the #otion to >ismiss prosper?

1% YES% The $act that NAPOCOR is the 'resent o(ner o$ the S"cat 'o(er '+ant *achineriesand e6"i'*ent does not constit"te a +ea+ !arrier to the co++ection o$ de+in6"ent ta)es $ro*the 'revio"s o(ner, MERALCO, (ho has de$a"+ted in its 'a#*ent% In Testate state of Concor9ia T. Li vs. Cit% of =anila, the Co"rt he+d that the "n'aid ta) attaches to the'ro'ert# and is charea!+e aainst the 'erson (ho had act"a+ or !ene$icia+ "se and 'ossessiono$ it reard+ess o$ (hether or not he is the o(ner% To i*'ose the rea+ 'ro'ert# ta) on thes"!se6"ent o(ner that (as neither the o(ner nor the !ene$icia+ "ser o$ the 'ro'ert# d"rinthe desinated 'eriods (o"+d not on+# !e contrar# to +a( !"t a+so "n7"st%

?% NO% The +etters cannot 6"a+i$# as notices o$ ta) assess*ent% A notice o$ assess*ent as'rovided $or in the Rea+ Pro'ert# Ta) Code sho"+d e$$ective+# in$or* the ta)'a#er o$ the va+"eo$ a s'eci$ic 'ro'ert#, or 'ro'ortion thereo$ s"!7ect to ta), inc+"din the discover#, +istin,c+assi$ication, and a''raisa+ o$ 'ro'erties% The notices do not contain the essentia+ in$or*ationthat a notice o$ assess*ent *"st s'eci$#, na*e+#, the va+"e o$ a s'eci$ic 'ro'ert# or 'ro'ortionthereo$ (hich is !ein ta)ed, nor does it state the discover#, +istin, c+assi$ication and a''raisa+o$ the 'ro'ert# s"!7ect to ta)ation% In $act, the tenor o$ the notices !es'ea8s an intention toco++ect "n'aid ta)es, th"s the re*inder to the ta)'a#er that the $ai+"re to 'a# the ta)es sha++a"thori.e the overn*ent to a"ction o$$ the 'ro'erties s"!7ect to ta)es%

@% YES% The Motion to Dis*iss (i++ 'ros'er since the tria+ co"rt is (itho"t a"thorit# toaddress the a++eed irre"+arit# in the iss"ance o$ the notices o$ assess*ent (itho"t 'rior ta)'a#*ent, "nder 'rotest, !# 'etitioner% Section G3 o$ the RPTC, 'rohi!its co"rts $ro* dec+arinan# ta) inva+id !# reason o$ irre"+arities or in$or*a+ities in the 'roceedins o$ the o$$icerschared (ith the assess*ent or co++ection o$ ta)es e)ce't "'on the condition that the ta)'a#er'a#s the 7"st a*o"nt o$ the ta), as deter*ined !# the co"rt in the 'endin 'roceedin% AsMERALCO $ai+ed to *a8e a 'rotest 'a#*ent o$ the ta) assessed, an# ar"*ent reardin the'roced"re o!served in the 're'aration o$ the notice o$ assess*ent and co++ection is $"ti+e as

the tria+ co"rt in s"ch a scenario cannot ass"*e 7"risdiction over the *atter% / =RALC3 vs.0arlis. G.R. No. 11";1. $une &, ##"5

I% aw materia$s consigned to ! #an'"acting arrived in the wareho'se o" !G ,reight -nc.he B'rea' o" !'stoms treated the raw materia$s as s'&@ect to ordinary import taxes. he

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consignee "ai$ed to "i$e the re8'isite import entry o" cargo and to c$aim the cargo immediate$y.h's% the >istrict !o$$ector o" !'stoms initiated an a&andonment proceedings over said cargo andiss'ed a notice to the ! #an'"act'ring giving them "i"teen 1C days "rom notice thereo" to "i$eentry o" the cargoesO otherwise% the cargoes wo'$d &e deemed a&andoned and so$d at p'&$ic

a'ction. he dec$aration o" a&andonment &ecame "ina$ and exec'tory.! #an'"act'ring "i$ed a comp$aint "or damages &e"ore the ! against !G ,reight -nc.

he $atter contends that the ! has no @'risdiction to review and n'$$i"y the dec$aration &y the!o$$ector o" !'stoms. -s the contention o" !G ,reight -nc. tena&$e?

YES% The tria+ co"rt has no 7"risdiction% The RTC is devoid o$ an# co*'etence to 'ass"'on the va+idit# or re"+arit# o$ sei."re and $or$eit"re 'roceedins cond"cted !# the "rea"o$ C"sto*s, and to en7oin or other(ise inter$ere (ith the said 'roceedins even i$ the sei."re(as i++ea+% S"ch act does not de'rive the "rea" o$ C"sto*s o$ 7"risdiction thereon% TheCo++ector o$ C"sto*s sittin in sei."re and $or$eit"re 'roceedins has e)c+"sive 7"risdiction tohear and deter*ine a++ 6"estions to"chin on the sei."re and $or$eit"re o$ d"tia!+e oods% TheReiona+ Tria+ Co"rts are 'rec+"ded $ro* ass"*in coni.ance over s"ch *atters even thro"h'etitions o$ certiorari, 'rohi!ition or *anda*"s% /R.. =arIan rei@Bt, )nc. vs Court of

Appeals. G.R. No. 1+#*". =arcB ", ##"5

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?443 AR E>AM QUESTIONS SUESTED ANS&ERS

QUESTION NO% I

axes are assessed "or the p'rpose o" generating reven'e to &e 'sed "or p'&$ic needs.axation itse$" is the power &y which the State raises reven'e to de"ray the expenses o" government. / @'rist said that a tax is what we pay "or civi$iation. /. -n o'r @'risdiction% which o" the "o$$owing statements may &e erroneo's* 1. axes are pec'niary in nat're. 2. axes are en"orced charges and contri&'tions. 3. axes are imposed on persons and property within the territoria$ @'risdiction o"

a State. . axes are $evied &y the exec'tive &ranch o" the government. . axes are assessed according to a reasona&$e r'$e o" apportionment.

='sti"y yo'r answer or choice &rie"$y.

The state*ent that ta)es are +evied !# the e)ec"tive !ranch o$ the overn*ent *a# !eerroneo"s% One characteristic or attri!"te o$ ta)es is that it is +evied !# the +eis+ative !od# o$ the state !eca"se the ta)in 'o(er is 'ec"+iar+# and e)c+"sive+# +eis+ative in character% As aenera+ r"+e, the 'o(er to ta) is '"re+# +eis+ative and (hich the +eis+ative !od# cannotde+eate either to the e)ec"tive or 7"dicia+ de'art*ent o$ the overn*ent (itho"t in$rinin"'on the theor# o$ se'aration o$ 'o(ers (PepsiFCola 0ottlin@ Copan% of tBe PBilippines vs.

=unicipalit% of Tanauan, Le%te6 NPC vs. Al8a%, 1+* SCRA 1&+'.

B. Which o" the "o$$owing propositions may now &e 'ntena&$e* 1. he co'rt sho'$d constr'e a $aw granting tax exemption strict$y against the taxpayer. 2. he co'rt sho'$d constr'e a $aw granting a m'nicipa$ corporation the power to tax

most strict$y. 3. he !o'rt o" ax /ppea$s has @'risdiction over decisions o" the !'stoms !ommissioner in

cases invo$ving $ia&i$ity "or c'stoms d'ties.. he !o'rt o" /ppea$s has @'risdiction to review decisions o" the !o'rt o" ax

/ppea$s.. he S'preme !o'rt has @'risdiction to review decisions o" the !o'rt o" /ppea$s.

The 'ro'osition that the co"rt sho"+d constr"e a +a( rantin a *"nici'a+ cor'orationthe 'o(er to ta) *ost strict+# *a# no( !e "ntena!+e% The 'o(er to ta) is 'ri*ari+# vested inConress- ho(ever, in o"r 7"risdiction, it *a# !e e)ercised !# +oca+ +eis+ative !odies, no +oner!# virt"e o$ a va+id de+eation as !e$ore !"t '"rs"ant to direct a"thorit# con$erred !# Section0, Artic+e > o$ the Constit"tion% / =actan Ce8u )nternational Airport vs. =arcos. GR No.1##+, Septe8er 11, 1&&*5% The !asic rationa+e $or the rant o$ ta) 'o(er to +oca+

overn*ent "nits is to sa$e"ard their via!i+it# and se+$Bs"$$icienc# !# direct+# rantin the*enera+ and !road ta) 'o(ers% /Mani+a E+ectric Co% vs% Province o$ La"na, @4G SCRA 04,J15

Accordin+#, inas*"ch as the 'o(er to ta) *a# !e e)ercised !# +oca+ +eis+ative !odiesno +oner !# va+id de+eation o$ said 'o(er !# Conress, !"t !# direct a"thorit# con$erred !#the Constit"tion, in inter'retin stat"tor# 'rovisions on *"nici'a+ $isca+ 'o(ers, do"!ts (i++have to !e reso+ved in $avor o$ *"nici'a+ cor'orations% /Cit% Governent of San Pa8lo, La@unavs. Re%es. GR No. 1!!#+. =arcB -, 1&&&'

Note: TBe proposition tBat tBe Court of Appeals Bas uris9iction to review 9ecisions of tBe Court of Ta/ Appeals is also untena8le, consi9erin@ tBat tBe present CTA Act (R.A.&+'Bas a9e tBe CTA a coFeJual u9icial 8o9% of tBe Court of Appeals. R.A.&+ was passe9 on

=arcB ;#, ##".

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QUESTION II

/. ! is $awFa&iding citien who pays his rea$ estate taxes prompt$y. >'e to a series o" typhoons and adverse economic conditions% an ordinance is passed &y ## !ity granting a 0

disco'nt "or payment o" 'npaid rea$ estate taxes "or the preceding year and the condonation o" a$$pena$ties on "ines res'$ting "rom the $ate payment.

/rg'ing that the ordinance rewards de$in8'ent taxpayers and discriminates against promptones% ! demands that he &e re"'nded an amo'nt e8'iva$ent to oneFha$" o" the rea$ taxes he paid.he m'nicipa$ attorney rendered an opinion that ! cannot &e reim&'rsed &eca'se the ordinancedid not provide "or s'ch reim&'rsement. ! "i$es s'it to dec$are the ordinance void on the gro'ndthat it is a c$ass $egis$ation. Wi$$ his s'it prosper? Exp$ain yo'r answer &rie"$y.

The s"it (i++ not 'ros'er% The re*ission or condonation o$ ta)es d"e and 'a#a!+e to thee)c+"sion o$ ta)es a+read# co++ected does not constit"te "n$air discri*ination% Each set o$ ta)es is a c+ass !# itse+$ and the +a( (o"+d !e o'en to attac8 as c+ass +eis+ation on+# i$ a++ta)'a#ers !e+onin to one c+ass (ere not treated a+i8e /2"an L"na S"!division, inc% vs%Sar*iento, 1 Phi+% @1 J10?5%

B. / $aw was passed granting tax exemption to certain ind'stries and investments "or a periodo" "ive years. B't three years $ater% the $aw was repea$ed. With the repea$% the exemptions wereconsidered revo(ed &y the B-% which assessed the investing companies "or 'npaid taxes e""ectiveon the date o" the repea$ o" the $aw.

H<! and K companies 8'estioned the assessments on the gro'nd that% having made theirinvestments in "'$$ re$iance with the period o" exemption granted &y the $aw% its repea$ vio$atedtheir constit'tiona$ right against the impairment o" the o&$igations o" contract. -s the contention o" the companies tena&$e or not? eason &rie"$y.

The contention o$ the co*'anies is not tena!+e% The +a( 'rovidin $or ta) e)e*'tion isranted "ni+atera++# and rat"ito"s+# !# Conress in the e)ercise o$ its ta)in 'o(er% Sinceta)ation is the r"+e and ta) e)e*'tion, the e)ce'tion, an# ta) e)e*'tion "ni+atera++# ranted

can !e (ithdra(n at the '+eas"re o$ the ta)in a"thorit# (itho"t vio+atin the Constit"tion(=actan Ce8u )nternational Airport vs. =arcos. G.R. No. 1##+. Septe8er 11, 1&&*'

&hat constit"tes an i*'air*ent o$ the o!+iation o$ contracts is the revocation o$ ane)e*'tion (hich is $o"nded on a va+"a!+e consideration !eca"se it ta8es the $or* and essenceo$ a contract /Casanova vs. Eor9, + PBil. 1- 51&#!'.

QUESTION NO% III

/. :D7 !o$$eges is a nonFstoc(% nonFpro"it ed'cationa$ instit'tion r'n &y the /rchdiocese o" B<!ity. -t co$$ected and received the "o$$owing* Which o" these a&ovecited income and donationwo'$d not &e exempt "rom taxation? Exp$ain &rie"$y.

a. 'ition "ees&. >ormitory "eesc. enta$ "rom canteen concessionairesd. -nterest "rom moneyFmar(et p$acements o" the t'ition "ees.e. >onation o" a $ot and &'i$ding &y schoo$ a$'mni

A++ o$ the inco*e derived !# the nonBstoc8, nonB'ro$it ed"cationa+ instit"tion (i++ !ee)e*'t $ro* ta)ation 'rovided the# are "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+'"r'oses% The Constit"tion 'rovides that a++ reven"es and assets o$ nonBstoc8, nonB'ro$ited"cationa+ instit"tion (hich are act"a++#, direct+# and e)c+"sive+# "sed $or ed"cationa+'"r'oses are e)e*'t $ro* ta)ation (Sec. ", par ;, Art. K), 1&+! Constitution'

The donation is, +i8e(ise, e)e*'t $ro* the donor=s ta) i$ act"a++#, direct+# ande)c+"sive+# "sed $or ed"cationa+ '"r'oses, 'rovided not *ore than @4H o$ the donation is "sed!# the donee $or ad*inistration '"r'oses% The donee, !ein a nonBstoc8, nonB'ro$it

ed"cationa+ instit"tion, is a 6"a+i$ied entit# to receive an e)e*'t donation s"!7ect toconditions 'rescri!ed !# +a( JSec. ", par ", Art. K), 1&+! Constitution, in relation to Sec.1#1 (A' (;', N)RC

Accordin+#, none o$ the cited inco*e and donation co++ected and received !# the nonBstoc8, nonB'ro$it ed"cationa+ instit"tion (o"+d not !e e)e*'t $ro* ta)ation%

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ALTERNATIE ANS&ER9

The $o++o(in recei'ts !# the nonBstoc8, nonB'ro$it ed"cationa+ instit"tion are note)e*'t $ro* ta)ation9

c% Renta+s $ro* canteen concessionaires% Renta+ inco*e is considered as "nre+ated tothe schoo+ o'erations, hence, ta)a!+e /DOF Order No%1@B, Dec%1G, 15% d% Interest $ro* *one#B*ar8et '+ace*ents o$ the t"ition $ees% The interest on the'+ace*ent is ta)a!+e /DOF Order No%1@B5% I$ ho(ever, the said interest is "sed act"a++#,direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses as 'roven !# s"!stantia+ evidence, the sa*e(i++ !e e)e*'t $ro* ta)ation /CIR vs% CA, ? SCRA @ J15%

The other ite*s o$ inco*e (hich (ere a++ derived $ro* schoo+Bre+ated activities (i++ !ee)e*'t $ro* ta)ation in the hands o$ the reci'ient i$ "sed act"a++#, direct+# and e)c+"sive+# $ored"cationa+ '"r'oses /Sec%3 'ar%@, Art% >I, 1 Constit"tion5%

The donation to a nonBstoc8, nonB'ro$it ed"cationa+ instit"tion (i++ !e e)e*'t $ro* the

donor=s ta) i$ "sed act"a++#, direct+# and e)c+"sive+# $or ed"cationa+ '"r'oses and 'rovided,that, not *ore than @4H o$ the donation is "sed $or ad*inistration '"r'oses /Sec,3, 'ar%3, Art%>I, 1 Constit"tion, in re+ation to Sec% 141 /A5/@5, NIRC5%

Note: Revenues 9erive9 fro assets use9 in tBe operation of cafeteriascanteens an9 8oo>stores are e/ept fro ta/ation provi9e9 tBe% are owne9 an9 operate9 8% tBee9ucational institution as ancillar% activities an9 tBe sae are locate9 witBin tBe scBool

preises.Eowever, tBe% sBall 8e su8ect to internal revenue ta/es on incoe fro

tra9e, 8usiness or otBer activit%, tBe con9uct of wBicB is not relate9 to tBe e/ercise or perforance 8% sucB e9ucational institutions of tBeir e9ucational purposes or functions(i.e. rental pa%ent fro tBeir 8uil9in@preises'.

TBeir interest incoe fro currenc% 8an> 9eposits an9 %iel9 fro 9epositsu8stitutes instruents use9 actuall%, 9irectl% an9 e/clusivel% in pursuance of tBeir

purposes as an e9ucational institution are e/ept fro tBe #H final ta/ an9 ! MH ta/ oninterest incoe un9er tBe e/pan9e9 forei@n currenc% 9eposit s%ste upon copliance of certain con9itions. (Revenue =eoran9u Circular No. !* ? #;'

B. S'ppose that :D7 !o$$eges is a proprietary ed'cationa$ instit'tion owned &y the/rch&ishops "ami$y% rather than the /rchdiocese% which o" those a&ovecited income and donationwo'$d &e exempt "rom taxation? Exp$ain &rie"$y.

I$ >Y Co++ees is a 'ro'rietar# ed"cationa+ instit"tion, a++ o$ its inco*e $ro* schoo+re+ated and nonBschoo+ re+ated activities (o"+d !e s"!7ect to the inco*e ta) !ased on itsareate net inco*e derived $ro* !oth activities% &ith reard to +etters /a5 to /d5, it sha++ !es"!7ect to a 14H ta), 'rovided, that i$ the ross inco*e $ro* "nre+ated trade, !"siness or otheractivit# e)ceeds 04H o$ the ross inco*e derived !# said schoo+, it sha++ !e s"!7ect to thenor*a+ cor'orate inco*e ta)% (Sec. !50, N)RC'

The donation o$ +ot and !"i+din (i++ +i8e(ise !e s"!7ect to the donor=s ta) !eca"se adonation to an ed"cationa+ instit"tion is e)e*'t on+# i$ the schoo+ is incor'orated as a nonBstoc8 entit# 'a#in no dividends% Since the donee is a 'ro'rietar# ed"cationa+ instit"tion, thedonation is ta)a!+e (Section 1#1 (A' (;', N)RC'%

QUESTION NO% I

/. !iting Section 10% /rtic$e L--- o" the 1+) !onstit'tion which provides that sa$aries o" @'dges

sha$$ &e "ixed &y $aw and that d'ring their contin'ance in o""ice their sa$ary sha$$ not &e decreased%a @'dge o" ## egiona$ ria$ !o'rt 8'estioned the ded'ction o" withho$ding taxes "rom his sa$arysince it res'$ts into a net ded'ction o" his pay. -s the contention o" the @'dge correct? eason &rie"$y.

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NO% The sa+aries o$ 7"dicia+ o$$icers are not ta)Be)e*'t and their ta)a!i+it# is notcontrar# to the 'rovisions o$ Sec% 14, Art% III o$ the 1 Constit"tion on the nonBdi*in"tiono$ the sa+aries o$ *e*!ers o$ the 2"diciar# d"rin their contin"ance in o$$ice% The c+ear intento$ the Constit"tiona+ Co**ission that $ra*ed the Constit"tion is to s"!7ect their sa+aries to ta)

as in the case o$ a++ ta)'a#ers% ence, the ded"ction o$ (ithho+din ta)es, !ein a *anner o$ co++ectin the inco*e ta) on their sa+ar#, is not a di*in"tion conte*'+ated !# the $"nda*enta++a( (Nitafan vs. C)R, 1- SCRA +" 51&+!'.

B. / m'nicipa$ity% BB% has an ordinance which re8'ires that a$$ stores% resta'rants% and otheresta&$ishments se$$ing $i8'or sho'$d pay a "ixed ann'a$ "ee o" <20%000.00. S'&se8'ent$y% them'nicipa$ &oard proposed an ordinance imposing a sa$es tax e8'iva$ent to o" the amo'nt paid"or the p'rchase or cons'mption o" $i8'or in stores% resta'rants and other esta&$ishments. hem'nicipa$ mayor% !!% re"'sed to sign the ordinance on the gro'nd that it wo'$d constit'te do'&$etaxation. -s the re"'sa$ o" the mayor @'sti"ied? eason &rie"$y. C

No, The re$"sa+ o$ the *a#or is not 7"sti$ied% The i*'ositions are o$ di$$erent nat"re

and character% The $i)ed ann"a+ $ee is in the nat"re o$ a +icense $ee i*'osed thro"h thee)ercise o$ 'o+ice 'o(er (hi+e the 0H ta) on '"rchase or cons"*'tion is a +oca+ ta) i*'osedthro"h the e)ercise o$ ta)in 'o(ers% oth a +icense $ee and a ta) *a# !e i*'osed on thesa*e !"siness or occ"'ation, or $or se++in the sa*e artic+e and this is not in vio+ation o$ ther"+e aainst do"!+e ta)ation (Copania General 9e Ta8acos 9e ilipinas vs. Cit% of =anila, +SCRA ;*! 51&*;6 San =i@uel 0rewer%, )nc. vs. Cit% of Ce8u, lF#;1, e8ruar% *, 1&!'

QUESTION NO% /. >'e to an 'ncertainty whether or not a new tax $aw is app$ica&$e to printing companies%>E, <rinters s'&mitted a $ega$ 8'ery to the B'rea' o" -nterna$ even'e on that iss'e. he B-iss'ed a r'$ing that printing companies are not covered &y the new $aw. e$ying on this r'$ing% >E,<rinters did not pay said tax.

S'&se8'ent$y% however% the B- reversed the r'$ing and iss'ed a new one stating that thetax covers printing companies. !o'$d the B- now assess >E, <rinters "or &ac( taxes correspondingto the years &e"ore the new r'$ing? eason &rie"$y.

NO% The IR cannot assess DEF Printers $or !ac8 ta)es corres'ondin to the #ears!e$ore the ne( r"+in !eca"se it (o"+d !e vio+ative o$ the 'rinci'+e o$ nonBretroactivit# o$ r"+ins and doin% &e++ sett+ed is the r"+e that r"+ins and circ"+ars, r"+es and re"+ations'ro*"+ated !# the Co**issioner o$ Interna+ Reven"e (o"+d have no retroactive a''+ication i$ to so a''+# the* (o"+d !e 're7"dicia+ to the ta)'a#ers% This is !eca"se Section ?3G o$ the NIRC'rovides that an# revocation, *odi$ication, or reversa+ o$ an# o$ the r"+es and re"+ations'ro*"+ated !# the Co**issioner sha++ not !e iven retroactive a''+ication i$ the revocation,*odi$ication, or reversa+ (i++ !e 're7"dicia+ to the ta)'a#er (C)R vs. Court of Appeals an9

AlBa8ra )n9ustries. GR No. 11!&+. e8ruar% *, 1&&!'

B. <; !orp. c$aimed as a ded'ction in its tax ret'rns the amo'nt o" <1%000%000 as &ad de&ts.he corporation was assessed &y the !ommissioner o" -nterna$ even'e "or de"iciency taxes on thegro'nd that the de&ts cannot &e considered as 5worth$ess%6 hence they do not 8'a$i"y as &ad de&ts.he company as(s "or yo'r advice on 5What "actors wi$$ he$p in determining whether or not thede&ts are &ad de&ts?6 /nswer and exp$ain &rie"$y.

The ascertain*ent o$ (orth+essness o$ !ad de!ts re6"ires 'roo$ o$ t(o $acts9 /15 thatthe ta)'a#er did in $act ascertain the de!t to !e (orth+ess in the #ear the ded"ction is so"ht-and /?5 in so doin, he acted in ood $aith% ood $aith is not eno"h% The ta)'a#er sho"+desta!+ish that d"rin the #ear $or (hich the ded"ction is so"ht, a sit"ation deve+o'ed as ares"+t o$ (hich it !eca*e evident in the e)ercise o$ so"nd, o!7ective !"siness 7"d*ent that

there re*ained no 'ractica+, !"t on+# va"e+# theoretica+, 'ros'ect that the de!t (o"+d ever!e 'aid% (Collector vs. Goo9ricB )nternational Ru88er, GR No. LF*-, 2ec. , 1&*!'

Re6"isites $or va+id ded"ction o$ !ad de!ts $ro* ross inco*e9

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1% There *"st !e an e)istin inde!tedness d"e to the ta)'a#er (hich *"st !e va+id and+ea++# de*anda!+e-

?% The sa*e *"st !e connected (ith the ta)'a#er=s trade, !"siness or 'ractice o$ 'ro$ession-

@% The sa*e *"st not !e s"stained in a transaction entered into !et(een re+ated 'artiesen"*erated "nder Sec% @G/5 o$ the Ta) Code o$ 1-

3% The sa*e *"st !e act"a++# chared o$$ the !oo8s o$ acco"nts o$ the ta)'a#er as o$ theend o$ the ta)a!+e #ear- and

0% The sa*e *"st !e act"a++# ascertained to !e (orth+ess and "nco++ecti!+e as o$ the endo$ the ta)a!+e #ear% /RR No% ?0B?44?5

QUESTION NO% I

/s an incentive "or investors% a $aw was passed giving new$y esta&$ished companies incertain economic ones exemption "rom a$$ taxes% d'ties% "ees% imposts and other charges "or aperiod o" three years. /B! !orp. was organied and was granted s'ch incentive. -n the co'rse o" &'siness% /B! !orp. p'rchased mechanica$ e8'ipment "rom :D7 -nc. Horma$$y% the sa$e is s'&@ectto a sa$es tax./. :D7 -nc. c$aims% however% that since it so$d the e8'ipment to /B! !orp. which is taxexempt% :D7 sho'$d not &e $ia&$e to pay the sa$es tax. -s this c$aim tena&$e?

NO% The c+ai* o$ >Y, Inc% is not tena!+e% E)e*'tion $ro* ta)es is 'ersona+ in nat"reand covers on+# ta)es $or (hich the ta)'a#erBrantee is direct+# +ia!+e% The sa+es ta) is a ta) onthe se++er (ho is not e)e*'t $ro* ta)es% Since >Y Inc% is direct+# +ia!+e $or the sa+es ta) andno ta) e)e*'tion 'rivi+ee is ever iven to hi*, there$ore, its c+ai* that the sa+e is ta) e)e*'tis not tena!+e% A ta) e)e*'tion is constr"ed in strictissi*i 7"ris and it can not !e 'er*itted toe)ist "'on va"e i*'+ications (Asiatic Petroleu Co., LT9. vs. Llanes, "& PBil "** 51&*'.

B. /ss'me arguendo that :D7 had to and did pay the sa$es tax. /B! !orp. $ater "o'nd o't%however% that :D7 mere$y shi"ted or passed on to /B! the amo'nt o" the sa$es tax &y increasing thep'rchase price. /B! !orp. now c$aims "or a re"'nd "rom the B'rea' o" -nterna$ even'e in anamo'nt corresponding to the tax passed on to it since it is tax exempt. -s the c$aim o" /B! !orp.meritorio's?

No% The c+ai* o$ AC Cor'% is not *eritorio"s% A+tho"h the ta) (as shi$ted to ACCor'% !# the se++er, (hat is 'aid !# it is not a ta) !"t 'art o$ the cost it has ass"*ed% Since,AC Cor'% is not a ta)'a#er, it has no ca'acit# to $i+e a c+ai* $or re$"nd% The ta)'a#er (ho can$i+e a c+ai* $or re$"nd is the 'erson stat"tori+# +ia!+e $or the 'a#*ent o$ the ta)%

QUESTION NO% II

/. ,or "ai$'re to comp$y with certain corporate re8'irements% the stoc(ho$ders o" /B! !orp.were noti"ied &y the Sec'rities and Exchange !ommission that the corporation wo'$d &e s'&@ect toinvo$'ntary disso$'tion. he stoc(ho$ders did not do anything to comp$y with the re8'irements% andthe corporation was disso$ved. !an the stoc(ho$ders &e he$d persona$$y $ia&$e "or the 'npaid taxeso" the disso$ved corporation? Exp$ain &rie"$y.

NO% Ta)es are 'ersona+ to the ta)'a#er% A cor'oration=s ta) de+in6"enc# cannot, $orinstance !e en$orced aainst its stoc8ho+ders !eca"se not on+# (o"+d this r"n co"nter to the'rinci'+e that ta)es are 'ersona+, !"t it (o"+d a+so not !e in accord (ith the r"+e that acor'oration is vested !# +a( (ith a 'ersona+it# that is se'arate and distinct $ro* those o$ the'ersons co*'osin it, as (e++ as $ro* that o$ an# other +ea+ entit# to (hich it *a# !e re+ated(Sunio vs. NLRC. G.R. No. -!!*!. $anuar% ;1, 1&+"'

o(ever, stoc8ho+ders *a# !e he+d +ia!+e $or the "n'aid ta)es o$ a disso+vedcor'oration i$ it a''ears that the cor'orate assets have 'assed into their hands (Tan Tion@ 0iovs. C)R. LF1-!!+'% A+so a stoc8ho+ders (ho has "n'aid s"!scri'tion is +ia!+e $or the de!ts o$ the

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cor'oration since the "n'aid de!t o$ the stoc8ho+der $or the '"rchase 'rice o$ the s"!scri!edshares re'resents an asset o$ the cor'oration in the hands o$ the stoc8ho+ders% B. /"ter the tax assessment had &ecome "ina$ and 'nappea$a&$e% the !ommissioner o" -nterna$

even'e initiated the "i$ing o" a civi$ action to co$$ect the tax d'e "rom H:. /"ter severa$ years% adecision was rendered &y the co'rt ordering H: to pay the tax d'e p$'s pena$ties and s'rcharges.he @'dgment &ecame "ina$ and exec'tory% &'t attempts to exec'te the @'dgment award were"'ti$e. S'&se8'ent$y% H: o""ered the !ommissioner a compromise sett$ement o" 0 o" the@'dgment award% representing that this amo'nt is a$$ he co'$d rea$$y a""ord. >oes the!ommissioner have the power to accept the compromise o""er? -s it $ega$ and ethica$? Exp$ain&rie"$y.

YES% Under Sec% ?43 JA o$ the 1 NIRC the Co**issioner *a# co*'ro*ise an#interna+ reven"e ta) (hen9 /15 A Reasona!+e do"!t as to the va+idit# o$ the c+ai* aainst theta)'a#er e)ist- or /?5 The $inancia+ 'osition o$ the ta)'a#er de*onstrates a c+ear ina!i+it# to'a# the assessed ta)%

As re'resented !# N> in his o$$er, on+# 04H o$ the 7"d*ent a(ard is a++ he co"+d rea++#a$$ord% This is an o$$er $or co*'ro*ise !ased on $inancia+ inca'acit# (hich the Co**issionersha++ not acce't "n+ess acco*'anied !# a (aiver o$ the secrec# o$ !an8 de'osits /Section G/F5,Nirc5% The (aiver (i++ ena!+e the Co**issioner to ascertain the $inancia+ 'osition o$ theta)'a#er, a+tho"h the in6"ir# need not !e +i*ited on+# to the !an8 de'osits o$ the ta)'a#er!"t a+so to his $inancia+ 'osition as re$+ected in his $inancia+ state*ents or other records "'on(hich his 'ro'ert# ho+dins can !e ascertained%

I$ indeed the $inancia+ 'osition o$ N> as deter*ined !# the Co**issioner de*onstratesa c+ear ina!i+it# to 'a# the ta), the acce'tance o$ the o$$er is +ea+ and ethica+ !eca"se thero"nd "'on (hich the co*'ro*ise (as anchored is (ithin the conte)t o$ the +a( and the rateo$ co*'ro*ise is (e++ (ithin and $ar e)ceeds the *ini*"* 'rescri!ed !# +a( (hich is on+# 14Ho$ the !asic ta) assessed%

QUESTION NO% III /. /# got married to G-S/ $ast =an'ary 2003. 4n Hovem&er 30% 2003% Gisa gave &irth totwins. In"ort'nate$y% however% Gisa died in the co'rse o" her de$ivery. >'e to comp$ications% oneo" the twins a$so died on >ecem&er 1% 2003. -n preparing his -ncome ax et'rn -C "or the year 2003% what sho'$d /# indicate in the- as his civi$ stat's* aC sing$eO &C marriedO cC head o" the "ami$y dC widowerO eC none o" the a&ove? Why? eason.

RAM sho"+d indicate :/!5 *arried< as his civi+ stat"s in 're'arin his Inco*e Ta) Ret"rn$or the #ear ?44@ and c+ai* the P@?,444 'ersona+ e)e*'tion $or *arried individ"a+ and theP1G,444 additiona+ e)e*'tion $or his t(ins, that is, P,444 additiona+ e)e*'tion 'erde'endent% The death o$ his (i$e d"rin the #ear (i++ not chane his stat"s !eca"se "nderSection @0 /C5 o$ the NIRC, sho"+d the s'o"se die d"rin the ta)a!+e #ear, the ta)'a#er *a# sti++c+ai* the e)e*'tions /that o$ !ein *arried5 as i$ the s'o"se or de'endent died at the c+ose o$ s"ch #ear% B. 4:D is the president and chie" exec'tive o""icer o" />> !omp'ters% -nc. When 4:D wasas(ed to @oin the government service as director o" a &'rea' 'nder the >epartment o" rade P-nd'stry% he too( a $eave o" a&sence "rom />>. Be$ieving that its &'siness o't$oo(% goodwi$$ andopport'nities improved with 4:D in the government% />> proposed to o&tain a po$icy o" ins'ranceon his $i"e. 4n ethica$ gro'nds% 4:D o&@ected to the ins'rance p'rchase &'t />> p'rchased thepo$icy anyway. -ts ann'a$ premi'm amo'nted to <100%000. -s said premi'm ded'cti&$e &y />>!omp'ters% -nc.? eason.

No% The 're*i"* is not ded"cti!+e !eca"se it is not an ordinar# !"siness e)'ense% Theter* ordinar#= is "sed in the inco*e ta) +a( in its co**on sini$icance and it has theconnotation o$ !ein nor*a+, "s"a+ or c"sto*ar#% Pa#in 're*i"*s $or the ins"rance o$ a'erson not connected to the co*'an# is not nor*a+, "s"a+ or c"sto*ar#%

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Another reason $or its nonBded"cti!i+it# is the $act that it can !e considered as an i++ea+co*'ensation *ade to a overn*ent e*'+o#ee% This is so !eca"se i$ the ins"red, his estate or

heirs (ere *ade as the !ene$iciar# /!eca"se o$ the re6"ire*ent o$ ins"ra!+e interest5, the'a#*ent o$ 're*i"* (i++ constit"te !ri!es, (hich are not a++o(ed as ded"ction $ro* rossinco*e (Sec. ;" 5A515c, N)RC'. On the other hand, i$ the co*'an# (as *ade the !ene$iciar#, (hether direct+# orindirect+#, the 're*i"* is not a++o(ed as a ded"ction $ro* ross inco*e (Section ;* (A' ("',N)RC'.

QUESTION NO% I>

/. L!! is the administrator o" the estate o" his "ather HJ!% in the estate proceedings pending

&e"ore the ## egiona$ ria$ !o'rt. Gast year% he received "rom the !ommissioner o" -nterna$even'e a de"iciency tax assessment "or the estate in the amo'nt o" <1%000%000. B't he ignoredthe notice. Gast month% the B- e""ected a $evy on the rea$ properties o" the estate to pay the

de$in8'ent tax. L!! "i$ed a motion with the pro&ate co'rt to stop the en"orcement and co$$ectiono" the tax on the gro'nd that the B- sho'$d have sec'red "irst the approva$ o" the pro&ate co'rt%which had @'risdiction over the estate% &e"ore $evying on its rea$ properties. -s L!!s contentioncorrect?

NO% CC=s contention is not correct% The en$orce*ent and co++ection o$ estate ta) ise)ec"tive in character and tas8 is s'eci$ica++# ascri!ed to the IR% There is nothin in the Ta)Code and in the 'ertinent re*edia+ +a( that i*'+ies the necessit# o$ the 'ro!ate co"rt orestate sett+e*ent o$ co"rt=s a''rova+ o$ the State=s c+ai* $or estate ta)es !e$ore the sa*e can!e en$orced and co++ected !# the IR% On the contrar#, "nder Section 3 o$ the 1 NIRC, it isthe 'ro!ate or sett+e*ent co"rt, (hich is 'rohi!ited $ro* a"thori.in the de+iver# o$ thedistri!"tive share to an# interested 'art# (itho"t a certi$ication $ro* the CIR sho(in the'a#*ent o$ the estate ta)% (=arcos )) vs. Court of Appeals, !; SCRA "!, $une -, 1&&!'

B. disp'ted a de"iciency tax assessment and 'pon receipt o" an adverse decision &y the!ommissioner o" -nterna$ even'e% "i$ed an appea$ with the !o'rt o" ax /ppea$s. Whi$e the appea$is pending% the B- served a warrant o" $evy on the rea$ properties o" to en"orce the co$$ectiono" the disp'ted tax. Jranting arguendo that the B- can $ega$$y $evy on the properties% what co'$d do to stop the process? Exp$ain &rie"$y.

RR can $i+e a *otion $or in7"nction (ith the Co"rt o$ Ta) A''ea+s to sto' thead*inistrative co++ection 'rocess% An a''ea+ to the CTA sha++ not s"s'end the en$orce*ent o$ the ta) +ia!i+it#, "n+ess a *otion to that e$$ect sha++ have !een 'resented in co"rt and ranted!# it on the !asis that s"ch co++ection (i++ 7eo'ardi.e the interest o$ the ta)'a#er o$ theovern*ent (Pirovano vs. C)R, 1" SCRA +;, 1&*-'.

The CTA is e*'o(ered to s"s'end the co++ection o$ interna+ reven"e ta)es and c"sto*sd"ties in cases 'endin a''ea+ on+# (hen9

/15 in the o'inion o$ the co"rt the co++ection !# the IR (i++ 7eo'ardi.e the interest o$ the overn*ent andor the ta)'a#er- and/?5 the ta)'a#er is (i++in to de'osit the a*o"nt !ein co++ected or to $i+e a s"ret# !ond$or not *ore than do"!+e the a*o"nt o$ the ta) to !e $i)ed !# the Co"rt /Sec% 11, RANo% 11?0, as a*ended !# RA No% ??5%

QUESTION NO% > /. 4n #arch 12% 2001% EH paid his taxes. en months $ater% he rea$ied that he had overpaidand so he immediate$y "i$ed a c$aim "or re"'nd with the !ommissioner o" -nterna$ even'e.

4n ,e&r'ary 2% 2003% he received the decision o" the !ommissioner denying EHs c$aim

"or re"'nd. 4n #arch 2% 2003% EH "i$ed an appea$ with the !o'rt o" ax /ppea$s. Was his appea$"i$ed on time or not? eason.

NO% The a''ea+ *ade !# REN (as not $i+ed on ti*e% A+tho"h A $i+ed his c+ai* $orre$"nd (ith the IR (ithin t(o #ears $ro* the date o$ 'a#*ent, he did not instit"te his action

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$or recover# (ithin the sa*e 'eriod o$ t(o /?5 #ears (ith the CTA% The t(oB#ear 'eriod o$ +i*itation $or $i+in a c+ai* $or re$"nd is not on+# a +i*itation $or '"rs"in the c+ai* at thead*inistrative +eve+ !"t a+so a +i*itation $or a''ea+in the case to the Co"rt o$ Ta) A''ea+s%The +a( 'rovides that :no s"it or 'roceedin sha++ !e $i+ed a$ter the e)'iration o$ t(o #ears

$ro* the date o$ the 'a#*ent o$ the ta) or 'ena+t# reard+ess o$ an# s"'ervenin ca"se that*a# arise a$ter 'a#*ent /Section ??, NIRC5% Since the a''ea+ (as on+# *ade on March ?3,?44@, *ore than t(o #ears had a+read# e+a'sed $ro* the ti*e the ta)es (ere 'aid on March1?, ?44@% Accordin+#, REN had +ost his 7"dicia+ re*ed# !eca"se o$ 'rescri'tion%

. / $aw was passed exempting doctors and $awyers "rom the operation o" the va$'e addedtax. 4ther pro"essiona$s comp$ained and "i$ed s'it 8'estioning the $aw "or &eing discriminatory andvio$ative o" the e8'a$ protection c$a'se o" the !onstit'tion since comp$ainants were not given thesame exemption. -s the s'it meritorio's or not? eason &rie"$y.

Yes, the s"it is *eritorio"s% The AT is desined $or econo*ic e$$icienc#- hence sho"+d!e ne"tra+ to those (ho !e+on to the sa*e c+ass% Pro$essiona+s ARE a c+ass o$ ta)'a#ers !#the*se+ves (ho, in co*'+iance (ith the r"+e o$ e6"a+it# o$ ta)ation, *"st !e treated a+i8e $or

ta) '"r'oses% E)e*'tin +a(#ers and doctors $ro* a !"rden to (hich other 'ro$essiona+s res"!7ected (i++ *a8e the +a( discri*inator# and vio+ative o$ the e6"a+ 'rotection c+a"se o$ theConstit"tion% &hi+e sin+in o"t a c+ass $or ta)ation '"r'oses (i++ not in$rine "'on thisconstit"tiona+ +i*itation /SBell vs. ao, &" PBil ;+&, 1&-"', sin+in o"t a ta)'a#er $ro* a c+ass(i++ no do"!t transress the constit"tiona+ +i*itation (3roc Su@ar Co., )nc. vs. Treasurer of 3roc Cit%, SCRA *#;, 1&*+'. Treatin doctors and +a(#ers as a di$$erent c+ass o$ 'ro$essiona+s (i++ not co*'+# (ith the re6"ire*ent o$ a reasona!+e, hence va+id c+assi$ication,!eca"se the c+assi$ication is not !ased "'on s"!stantia+ distinction (hich *a8es rea+di$$erences% The c+assi$ication does not co*'+# (ith the re6"ire*ent that it sho"+d !eer*ane to the '"r'ose o$ the +a( either% (Pepsi Cola 0ottlin@ Co., )nc. vs. Cit% of 0utuan, "SCRA !+&, 1&*+'

ANOTER ANS&ER9

The s"it is not *eritorio"s% The +a( does not vio+ate the e6"a+ 'rotection c+a"se o$ theconstit"tion% The e6"a+ 'rotection c+a"se o$ the Constit"tion *ere+# re6"ires that a++ 'ersonss"!7ected to +eis+ation sha++ !e treated a+i8e, "nder the circ"*stances and conditions, !oth inthe 'rivi+ees con$erred and in the +ia!i+ities i*'osed% The e6"a+it# in ta)ation r"+e is notvio+ated i$ c+assi$ications or distinctions are *ade as +on as the sa*e are !ased on reasona!+eand s"!stantia+ di$$erences% (Pepsi Cola 0ottlin@ Co., )nc. vs. Cit% of 0utuan, " SCRA !+&,1&*+'

In the instant case, the 'ro$essions o$ doctors and +a(#ers are not 'rinci'a++# ai*ed atearnin *one# !"t $or the service o$ the 'eo'+e% The e)e*'tion ranted to doctors and+a(#ers $ro* the o'eration o$ the AT is 7"sti$ied, as it is not discri*inator# aainst the other'ro$essiona+s !eca"se the# have reasona!+e and s"!stantia+ di$$erences in the cond"ct o$ their'ro$essions%

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IMPORTANT TOPICS

ENERAL PRINCIPLES

LIMITATIONS ON TE TA>IN PO&ER

A. )nBerent Liitations1. <'&$ic <'rpose o" axes2. HonF>e$ega&i$ity o" the axing <ower3. erritoria$ity or Sit's o" axation. ax Exemption o" the Jovernment. -nternationa$ !omity

0. Constitutional Liitations1. >'e process c$a'se2. E8'a$ protection c$a'se3. ,reedom o" speech and o" the press. HonFin"ringement o" re$igio's "reedom and worship. HonFimpairment o" contracts9. HonFimprisonment "or de&t or nonFpayment o" po$$ tax. '$e re8'iring that appropriations% reven'e and tari"" &i$$s sha$$ originate exc$'sive$y "rom

the Ao'se o" epresentatives). Ini"ormity% e8'ita&i$ity and progressivity o" taxation+. Gimitations on the congressiona$ power to de$egate to the <resident the a'thority to "ix

tari"" rates% import and export 8'otas% etc.10. ax exemption o" properties act'a$$y% direct$y and exc$'sive$y 'sed "or re$igio's% charita&$e

and ed'cationa$ p'rposes.

11. Loting re8'irement in connection with the $egis$ative grant o" tax exemption12. HonFimpairment o" the @'risdiction o" the S'preme !o'rt in tax cases13. Exemption "rom taxes o" the reven'es and assets o" ed'cationa$ instit'tions% inc$'ding

grants% endowments% donations and contri&'tions.

INCOME TA>ATION

Cor'orations $or inco*e ta) '"r'oses,a% Inc+"des9

1. <artnerships% no matter how created or organied2. =oint stoc( companies3. =oint acco'nts c'entas en participationC. /ssociations or ins'rance companies

!% Does not inc+"de1. Jenera$ <ro"essiona$ partnerships2. =oint vent're or consorti'm "ormed

i. "or p'rpose o" 'nderta(ing constr'ction pro@ects engaging in <etro$e'm% !oa$%Jeotherma$% and other energy operations%

ii. <'rs'ant to an operation or consorti'm agreement 'nder a service contract with the

Jovernment. (Section 22 (B), NIRCCNote: TBe ain cBaracteristic of a oint venture is tBat tBe oint control ust 8econtaine9 in a contractual a@reeent.

Example o unregi!tered partner!"ip taxa#le a! a corporation/"ter an extra@'dicia$ sett$ement% the coFheirs 'sed the inheritance or the incomes

derived there"rom as a common "'nd to prod'ce pro"its "or themse$ves. ($na %!& CIR, '

SCRA ')

Example o co*o+ner!"ip not deemed unregi!tered partner!"ip taxa#le a! corporation

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!oFheirs who inherited properties which prod'ce income sho'$d not a'tomatica$$y&e considered as partners o" an 'nregistered partnership or corporation s'&@ect to incometax. Sharing o" gross ret'rns does not &y itse$" esta&$ish a partnership% there m'st &e an'nmista(a&$e intention to "orm a partnership or @oint vent're. ($#illo!, r& %!& CIR, -./

SCRA '.0)

E)c+"sions $ro* ross inco*e "nder the NIRC1. Gi"e -ns'rance proceeds2. /mo'nt received &y ins'red as ret'rn o" premi'm3. Ji"ts% &e8'est and devices. !ompensation "or in@'ries or sic(ness. -ncome exempt 'nder treaty9. etirement &ene"its% pensions% grat'ities% etc.. #isce$$aneo's items. Sec. 32 BC% H-! o" 1++C

C+asses o$ Ded"ctions1% Individ"a+s

a. with gross compensation income "rom emp$oyerFemp$oyee re$ationship on$y1C premi'm payments on hea$th andMor hospita$iation ins'rance2C persona$ additiona$ exemptions

&. gross income "rom &'siness or practice o" pro"ession1C 4ptiona$ Standard >ed'ction 4S>C2C -temied ded'ctions3C premi'm payments on hea$th andMor hospita$iation ins'ranceC persona$ additiona$ exemptions

?% Cor'orations-temied >ed'ctions

Ite*i.ed ded"ctionsa. ordinary and necessary expenses

&. interestsc. taxesd. $ossese. &ad de&ts". depreciation o" propertyOg. dep$etion o" oi$ and gas we$$s and minesh. charita&$e and other contri&'tionsi. research and deve$opment@. pension tr'st contri&'tions o" emp$oyees(. premi'm payments on hea$th andMor hospita$iation ins'rance.

Specia$ >ed'ctions "or <rivate Ed'cationa$ -nstit'tions/ private ed'cationa$ instit'tions may at its option e$ect either*

aC to ded'ct expendit'res otherwise considered as capita$ o't$ays o"deprecia&$e assets inc'rred d'ring the taxa&$e year "or the expansion o" schoo$"aci$ities% or

(b) to ded'ct a$$owance "or depreciation thereo" (Sec& .' (A) (2), NIRC)

E)e*'tions $or Senior Citi.ensSenior citiens sha$$ &e treated as dependents provided "or in the H-! and as s'ch

individ'a$ taxpayers caring "or them% &e they re$atives or not sha$$ &e accorded the privi$egesgranted &y the !ode inso"ar as having dependents are concerned. (Sec& (a) RA No& '.21 Bay#ay %!& CIR, CA Ca!e No& 234, 5ecem#er 24, -//0)

-n determining persona$ exemptions a$$owa&$e to individ'a$s 'nder Section 3 o" the H-!as amended &y / H4. )2% a senior citien may &e treated as dependent. ,or this p'rpose% the

de"inition o" the term 5head o" a "ami$y6 'nder the said section sha$$ &e deemed amended to re"erto the de"inition 'nder /rt. o" this imp$ementing r'$es and reg'$ations. (Rule 0, ImplementingRule! and Regulation! o RA No& '.2)

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Note9 "e taxpayer:! application or compromi!e !"all not #e con!idered unle!! "e +ai%e!in +riting "i! pri%ilege under RA -'4 and ot"er general or !pecial la+!& Suc" +ai%er !"allaut"ori7e t"e Commi!!ioner to in;uire into "i! #an< depo!it!&

. <ower to assess and co$$ect the correct amo'nt o" tax

TA> REMEDIES OF TE OERNMENT

• TA> REMEDIES UNDER TE 1 TA> CODE

1. S'mmary R remedies at the administrative $eve$ or reg'$ation that are exec'ted witho'tceremony or de$ayO short or conciseO

2. S'&stantive R remedies provided "or &y $aw or reg'$ationO an essentia$ part or constit'ent orre$ating to what is essentia$O

3. <roced'ra$ R remedies invo$ving $aw o" p$eading% evidence% @'risdiction% etc.. /dministrative R remedies avai$a&$e at the administration B-C $eve$O

. ='dicia$ R remedies that are en"orced thro'gh @'dicia$ action% which may &e civi$ or crimina$

SUSTANTIE REMEDIES

1. -mposition o" withho$ding tax on certain income payments =Sec& (B), NIRC>

2. -ss'ance o" reven'e reg'$ations &y administrative agency =Sec& 2''* 2', NIRC>

3. ,ai$'re to o&ey s'mmons =Sec& 200, NIRC>

4. >ec$aration 'nder pena$ties o" per@'ry =Sec& 20, NIRC>

A9inistrative interpretations sBoul9 8e respecte9 he interpretation given &y the administrative o""icer charged &y reason o" his o""ice to

carry o't the provisions o" a stat'te sho'$d &e respected whenever s'ch interpretation isassai$ed &y someone who a$$eges no reasons o" weight to contradict or wea(en it&

(Commi!!ioner %!& 6ede!ma& .- SCRA /)

Principle of Le@islative Approval 8% Reenactenthe princip$e o" $egis$ative approva$ o" administrative interpretation o" a stat'te is to the

e""ect that the reenactment o" a stat'te s'&stantia$$y 'nchanged is pers'asive indication o" theadoption &y !ongress o" a prior exec'tive constr'ction& (ABS*CBN Broadca!ting Corp& %!& CAand Commi!!ioner& -43 SCRA -'2)

ADMINISTRATIE REMEDIES OF TE OERNMENT A. Power to Assess

<res'mption o" !orrectness o" the assessments made &y the !ommissioner

/ssessment <rocess

1. Examination o" &oo(s o" acco'nts and other acco'nting records o" taxpayers &yreven'e o""icers to determine his correct tax $ia&i$ity

2. <reparation o" tentative "indings and ho$ding o" in"orma$ con"erence3. -ss'ance o" <re$iminary /ssessment Hotice </HC. -ss'ance o" ,orma$ /ssessment Hotice ,/HC and $etter o" demand

0. Power to Collect 2eficienc% or 2elinJuent Ta/es1. ,i$ing o" administrative protest &y the taxpayer against the assessment 30Fday periodC2. S'&mission o" doc'mentary evidence 90Fday periodC

Hote* S'&mission o" doc'ments within the 90 day period is optional to t"etaxpayer . (Standard C"artered Ban< %!& CIR, CA Ca!e No& 0/0, Augu!t -0, 244-)

3. >enia$ o" protest &y the !ommissioner or his a'thoried representative. /ppea$ &y the taxpayer o" the "ina$ decision o" the !ommissioner or his a'thoried

representative on the disp'ted assessment to the !/ within 30 days "rom the receipto" the decision% or in case o" inaction "rom the $apse o" the 1)0 day periodC

Admini!trati%e Remedie! o t"e 8o%ernment

1. ax Gien

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2. >istraint o" persona$ property% or $evy o" rea$ property% or garnishment o" &an( deposits3. Sa$e o" property o" a de$in8'ent taxpayer

. ,or"eit're. !ompromise and a&atement9. <ena$ties and "ines. S'spension o" &'siness operations

Note9 "e ollo+ing are t"e ca!e! +"ic" may #e compromi!ed9-& 5elin;uent account!12& Ca!e! under admini!trati%e prote!t ater i!!uance o t"e ?inal A!!e!!ment Notice to

t"e taxpayer +"ic" are !till pending in t"e Regional $ice!, Re%enue 5i!trict $ice!,6egal Ser%ice, 6arge axpayer Ser%ice (6S), Collection Ser%ice, Enorcement Ser%iceand ot"er oice! in t"e National $ice1

.& Ci%il tax ca!e! #eing di!puted #eore t"e court!1'& Collection ca!e! iled in court!1& Criminal %iolation!, ot"er t"an t"o!e already iled in court or t"o!e in%ol%ing criminal

tax raud& (Re%enue Regulation No& .4*42)

• 2UDICIAL REMEDIES OF TE OERNMENT

1% Civi+ Actiona. By "i$ing a civi$ case "or the co$$ection o" a s'm o" money with the proper reg'$ar co'rt

!o$$ecti&i$ity arises*

1C Se$"Fassessed tax shown in the ret'rn was not paid within the date prescri&ed&y $aw

2C ,ina$ assessment is not protested administrative$y within 30 days "rom date o" receipt

3C HonFcomp$iance with the condition $aid in the approva$ o" the protestC ,ai$'re to "i$e a time$y appea$ to the !/ on the "ina$ decision o" the

!ommissioner or his a'thoried representative on the disp'ted assessment&. By "i$ing an answer to the petition "or review "i$ed &y the taxpayer with the !/

?% Cri*ina+ Action

a. /ttempt to evade or de"eat tax (Sec& 2', NIRC)

b. ,ai$'re to "i$e ret'rn% s'pp$y correct and acc'rate in"ormation% pay tax% withho$d and

remit tax and re"'nd excess taxes withhe$d on compensation (Sec& 2, NIRC)

TA> REMEDIES OF TE TA>PAYER

• REMEDIES OF TA>PAYERS

A9inistrative Ree9ies

-& Be"ore payment o" the de"iciency tax assessment R "i$e a written protest within 30 days

"rom date o" receipt (Sec& 223, NIRC)2& /"ter payment o" the de"iciency tax assessment R "i$e a written c$aim "or re"'nd or tax

credit with the appropriate government agency the B- or the >epartment o" ,inance4ne Stop Shop !enterC =Sec!& 24' (C) and 22/, NIRC>

$u9icial Ree9ies

-" the protest is denied in who$e or in part% or is not acted 'pon% within 1)0 days "roms'&mission o" doc'ments% the taxpayer adverse$y a""ected &y the decision or inaction mayappea$ to the !/ within 30 days "rom receipt o" the said decision% or "rom the $apse o" the1)0 day periodO otherwise% the decision sha$$ &ecome "ina$% exec'tory and demanda&$e.(Sec& 223, NIRC)

Note9 It "a! #een "eld #y t"e Court o ax Appeal! t"at@ In ca!e! o inaction, Section223 o t"e ax Code merely ga%e t"e taxpayer an option9 ir!t, "e may appeal to t"e Court o ax Appeal! +it"in t"irty (.4) day! rom t"e lap!e o t"e one "undred eig"ty (-34) day period

pro%ided or under t"e !aid !ection, or !econd, "e may +ait until t"e Commi!!ioner decide! on"i! prote!t #eore "e ele%ate! "i! ca!e& "e taxpayer +a! gi%en t"i! option !o t"at in ca!e "i!

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prote!t i! not acted upon +it"in t"e -34*day period, "e may #e a#le to !ee< immediate relie and need not +ait or an indeinite period o time or t"e Commi!!ioner to decide& But i "ec"oo!e! to +ait or a po!iti%e action on t"e part o t"e Commi!!ioner, t"en t"e !ame could notre!ult in t"e a!!e!!ment #ecoming inal, executory and demanda#le&@ ( Lascona Lan9 Co., )nc.

vs. C)R, CTA Case No. -!!!. $anuar% ", ###

Su8stantive Ree9ies

1. ;'estioning the constit'tiona$ity or va$idity o" tax stat'tes or reg'$ations

2. HonFretroactivity o" r'$ings (Sec& 2'0, NIRC)

3. ,ai$'re to in"orm the taxpayer in writing o" the $ega$ and "act'a$ &ases o" assessment

ma(es it void (Sec& 223, NIRC)

4. <reservation o" &oo(s o" acco'nts and onceFaFyear examination "or income tax p'rposes

(Sec& 2., NIRC)

5. <'&$ication o" #! and #4 R Whi$e the r'$eFma(ing a'thority o" the !- is not

do'&ted% $i(e any other government agency% the !ommissioner may not disregard $ega$re8'irements or app$ica&$e princip$es in the exercise o" 8'asiF$egis$ative powers. he

d'e o&servance o" the re8'irements o" notice% hearing and p'&$ication sho'$d not have&een ignored& (CIR %!& Mic"el 6"uillier a+n!"op& 8R No& -4/'& uly -, 244.)

Proce9ural Ree9ies (Revenue Re@ulations No. 1F&&'

1. Hotice "or -n"orma$ !on"erenceRe%enue $icera. /'dits the taxpayers records&. States in his report whether or not the taxpayer agrees with his "indings that the

taxpayer is $ia&$e "or de"iciency tax or taxes.2. -n"orma$ !on"erence Getter

Re%enue 5i!trict $ice or Special In%e!tigation 5i%i!ion or C"ie o 5i%i!ion concerned (in ca!e o BIR National $ice)

a. -n"orms the taxpayer in writing% in case the taxpayer is not amena&$e% o" the

discrepancy or discrepancies in the taxpayers payment o" his interna$ reven'etaxes "or the p'rpose o" 5-n"orma$ !on"erence61C axpayer respondsO or i" 2C axpayer "ai$s to respond within "i"teen 1C days "rom date or receipt o" notice

o" in"orma$ con"erence% he sha$$ &e considered in de"a'$t.&. Endorses the case% in case o" de"a'$t or taxpayers response is not accepta&$e% to

the /ssessment >ivision o" the even'e egiona$ 4""ice or to the !ommissioner orhis d'$y a'thoried representative

3. <re$iminary /ssessment Hotice </HC A!!e!!ment 5i%i!ion or t"e Commi!!ion or "i! duly aut"ori7ed repre!entati%ea. eviews and eva$'ates. -" there exists s'""icient &asis to assess the taxpayer "or

any de"iciency tax or taxes% the said 4""ice sha$$ iss'e to the taxpayer a </H "or theproposed assessment.

1C axpayer responds within "i"teen 1C days "rom date o" receipt o" the </H2C -" the taxpayer "ai$s to respond within 1 days "rom receipt o" </H% he sha$$ &e

considered in de"a'$t.&. -ss'es a "orma$ $etter o" demand and assessment notice% in case o" de"a'$t or

taxpayers response is not accepta&$e% ca$$ing "or the payment o" the taxpayersde"iciency tax $ia&i$ity.

Aowever% a preFassessment notice sha$$ not &e re8'ired in the "o$$owing cases% inwhich case% a "orma$ assessment notice sha$$ &e s'""icient*

1C When the "inding "or any de"iciency tax is the res'$t o" mathematica$ error inthe comp'tation o" the tax as appearing on the "ace o" the ret'rnO or

2C When a discrepancy has &een determined &etween the tax withhe$d and theamo'nt act'a$$y remitted &y the withho$ding agentO or

3C When a taxpayer who opted to c$aim a re"'nd or tax credit o" excess credita&$ewithho$ding tax "or a taxa&$e period was determined to have carried over anda'tomatica$$y app$ied the same amo'nt c$aimed against the estimated tax$ia&i$ities "or the taxa&$e 8'arter or 8'arters o" the s'cceeding taxa&$e yearO or

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C When the excise tax d'e on excisa&$e artic$es has not &een paidOC When an artic$e $oca$$y p'rchased or imported &y an exempt person% s'ch as%

&'t not $imited to% vehic$es% capita$ e8'ipment% machineries and spare parts%has &een so$d% traded or trans"erred to nonFexempt persons.

. ,orma$ Getter o" >emand and /ssessment HoticeCommi!!ioner or "i! duly aut"ori7ed repre!entati%e iss'es the "orma$ $etter o" demandand assessment notice which sha$$ state the "acts% the $aw% r'$es and reg'$ations% or@'rispr'dence on which the assessment is &asedO otherwise% it sha$$ &e void.

. >isp'ted /ssessmentsaxpayer a. <rotests administrative$y against the "orma$ $etter o" demand and assessment

notice within thirty 30C days "rom receipt thereo". 4therwise% the assessment sha$$&ecome "ina$% exec'tory and demanda&$e.

&. S'&mits re8'ired s'pporting doc'ments within sixty 90C days "rom the date o" "i$ing his $etter o" protest% otherwise% the assessment sha$$ &ecome "ina$% exec'tory

and demanda&$e.c. /ppea$s to the !o'rt o" ax /ppea$s% i" protest is denied in who$e or in part &y the

!ommissioner% within thirty 30C days "rom date o" receipt o" decisionO otherwise%the assessment sha$$ &ecome "ina$% exec'tory and demanda&$e.

-" the !ommissioner "ai$s to act on the taxpayers protest within oneh'ndred eighty days 1)0C days "rom date o" s'&mission o" re8'ireds'pporting doc'ments% the taxpayer may appea$ to the !o'rt o" ax /ppea$swithin thirty 30C days "rom the $apse o" the 1)0Fday periodO otherwise% theassessment sha$$ &ecome "ina$% exec'tory and demanda&$e.

Con!tructi%e Ser%ice o Noticehere sha$$ &e constr'ctive service o" notice in the "o$$owing cases*

1. -" the notice to the taxpayer is served &y registered mai$% and no

response is received "rom the taxpayer within the prescri&ed period2. -" the notice is persona$$y served on the taxpayer or his d'$y a'thoried

representative% who% however% re"'se to ac(now$edge receipt thereo"

3. By $eaving the notice in the premises o" the taxpayer and this "act o"

service is attested to% witnessed and signed &y at $east two 2C reven'e o""icersother than the reven'e o""icer who constr'ctive$y served the same. (Sec& .&-&,Re%& Reg!& No& -2*//)

• ASSESSMENT AND PROTEST

A!!e!!ment

he genera$ r'$e is that taxes are se$"Fassessing and th's% do not re8'ire the iss'ance o" anassessment notice in order to esta&$ish the tax $ia&i$ity o" a taxpayer. he exceptions are*

1. ax period o" a taxpayer is terminated =Sec& 0(5), NIRC> 2. >e"iciency tax $ia&i$ity arising "rom a tax a'dit cond'cted &y the BIR =Sec& 0(B), NIRC>

3. ax $ien =Sec& 2-/, NIRC>

4. >isso$ving corporation =Sec& 2(c), NIRC>

Signiicance o A!!e!!ment9

a. -n the proper p'rs'it o" @'dicia$ and extra@'dicia$ remedies to en"orce taxpayer$ia&i$ities and certain matters that re$ate to it% s'ch as the imposition o" s'rchargesand interests%

&. -n the app$ication o" stat'te o" $imitations%c. -n the esta&$ishment o" tax $iens% andd. -n estimating the reven'es that may &e co$$ected &y government in the coming

year.

rote!t

1. >irect denia$ o" protest

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Admini!trati%e deci!ion on a di!puted a!!e!!ment R he decision o" the !ommissioner orhis d'$y a'thoried representative sha$$ aC state the "acts% the app$ica&$e $aw%r'$es% and reg'$ations% or @'rispr'dence on which s'ch decision is &asedOotherwise% the decision sha$$ &e void% in which case% the same sha$$ not &e

considered a decision on a disp'ted assessment% and &C that the same is his "ina$decision. (Sec& .&-&, Re%& Reg!& No& -2 //)

2. -ndirect denia$ o" protest ='rispr'denceC

a. !ommissioner did not r'$e on the taxpayers motion "or reconsideration o" the

assessment R -t was on$y when respondent received the s'mmons on the civi$ action"or the co$$ection o" de"iciency income tax that the period to appea$ commenced tor'n. (Commi!!ioner %!& nion S"ipping Corp& -3 SCRA ')

b. e"erra$ &y the !ommissioner o" re8'est "or reinvestigation to the So$icitor Jenera$

(Repu#lic %!& 6im ian eng Son!)

c. eiterating the demand "or immediate payment o" the de"iciency tax d'e to

taxpayers contin'ed re"'sa$ to exec'te waiver (Commi!!ioner %!& Ayala Securitie!Corp& 4 SCRA 24')

PRESCRIPTIE PERIODS UNDER TE TA> CODE

1% Period to assess the ta)8eneral Rule9

AEE 3C DE/S a"ter the date the ret'rn is d'e or "i$ed% whichever is $ater (Sec& 24.,-// NIRC)&

Exception!91. ,/-GIE 4 ,-GE / EIH* EH 10C DE/S "rom the date o" the discovery o" the

omission to "i$e the ret'rn (Sec&222=A>)12. ,/GSE 4 ,/>IGEH EIH with -HEH-4H 4 EL/>E AE /:* EH 10C DE/S "rom

the date o" the discovery o" the "a$sity or "ra'd (Sec&222 =A> ?% Period to co++ect the assessed ta)

a. ,-LE C DE/S R "rom assessment or within period "or co$$ection agreed 'pon in writing&e"ore expiration o" the Fyear period (Sec& 222, -// NIRC)&&. EH 10C DE/S R witho't assessment in case o" "a$se or "ra'd'$ent ret'rn with intent toevade or "ai$'re to "i$e ret'rn (Sec& 222, -// NIRC)&

@% Period to $i+e cri*ina+ action,-LE C DE/S "rom*

1C day o" the commi!!ion o t"e %iolation o" the $aw% and2C -" the same &e not (nown, rom di!co%ery t"ereo and t"e

in!titution o t"e Dudicial proceeding! "or its investigation and p'nishment.

• FALSE RETURN FRAUDULENT RETURN

he distinction &etween a al!e return and a raudulent return is that the "irst mere$yimp$ies a deviation "rom the tr'th or "act whether intentiona$ or not% whereas the second is

intentiona$ and deceit"'$ with the so$e aim o" evading the correct tax d'e.

here is "ra'd in the "o$$owing decided cases*1. ,ra'd m'st &e the prod'ct o" a de$i&erate intent to evade taxes (alandoni %!& Repu#lic& -

SCRA -)2. Simp$e statement that ret'rn "i$ed was not "ra'd'$ent does not disprove existence o" "ra'd

(ayengco %!& Collector& CA Ca!e No& -& uly .-, -/0')3. S'&stantia$ 'nderFdec$arations o" income "or six consec'tive "ive years demonstrate

"ra'd'$ence o" ret'rn (ere7 %!& CA& 6*-44& May .4, -/3). <resence o" "ictitio's expenses% with no evidence presented% proves existence o" "ra'd (an

8uan %!& Commi!!ioner)

Aowever% the co'rts did not consider the tax ret'rns "i$ed as "a$se or "ra'd'$ent with intentto evade the payment o" tax in the "o$$owing cases*

1. #ere 'nderstatement in the tax ret'rn wi$$ not necessari$y imp$y "ra'd (alandoni %!&

Repu#lic)

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2. Sa$e o" rea$ property "or a price $ess than its "air mar(et va$'e is not necessari$y a "a$se

ret'rn (Commi!!ioner %!& B&?& 8oodric" "il!&)

3. ,ra'd is a 8'estion o" "act and the circ'mstances constit'ting "ra'd m'st &e a$$eged andproved in the tria$ co'rt (Commi!!ioner %!& Ayala Securitie!& 4 SCRA 24')

4. ,ra'd is never imp'ted and the co'rts never s'stain "indings o" "ra'd 'pon circ'mstances

that on$y create s'spicion (Commi!!ioner %!& a%ier& -// SCRA 32')

5. #ista(es o" reven'e o""icers on three di""erent occasions remove e$ement o" "ra'd (A7nar

%!& CA and Collector)

CIIL PENALTIES

• CIIL PENALTY SURCARE

1% ?0H s"rchare1C ,ai$'re to "i$e any ret'rn and pay the tax d'e thereon as re8'ired 'nder the provisions

o" this !ode or r'$es and reg'$ations on the date prescri&edO or2C In$ess otherwise a'thoried &y the !ommissioner% "i$ing a ret'rn with an interna$

reven'e o""icer other than those with whom the ret'rn is re8'ired to &e "i$edO or3C ,ai$'re to pay the de"iciency tax within the time prescri&ed "or its payment in the

notice o" assessmentO or

(4) ,ai$'re to pay the "'$$ or part o" the amo'nt o" tax shown on any ret'rn re8'ired to &e

"i$ed 'nder the provisions o" this !ode or r'$es and reg'$ations% or the "'$$ amo'nt o" tax d'e "or which no ret'rn is re8'ired to &e "i$ed% on or &e"ore the date prescri&ed "orits payment& (Sec& 2'3, NIRC1 Sec& '&-, Re%& Reg!& No& -2*//)

?% 04H s"rchare1C in case o" wi$$"'$ neg$ect to "i$e the ret'rn within the period prescri&ed &y the !ode% or

wi$$ not app$y in case a taxpayer% witho't notice "rom the !ommissioner% or his d'$y

a'thoried representative% vo$'ntari$y "i$es the said ret'rn on$y 2 sha$$ &eimposedC

0 s'rcharge sha$$ &e imposed in case the taxpayer "i$es the ret'rn on$y a"ter prior

notice in writing "rom the !ommissioner or his d'$y a'thoried representative (Sec&'&2, Re%& Reg& -2*//)

2C in case a "a$se or "ra'd'$ent ret'rn is wi$$"'$$y made<rima ,acie evidence s'&stantia$ 'nderdec$aration (exceeding .4 o t"at declared) o" taxa&$e sa$es%

receipts or income% or s'&stantia$ overstatement (exceeding .4 o actual deduction!) o" ded'ctions

Sec. 2)CNote9 / taxpayer may modi"y% change or amend his tax ret'rn within three 3C years

"rom the date o" s'ch "i$ing% provided however that no notice "or a'dit or investigationo" s'ch ret'rn% statement or dec$aration has% in the meantime &een act'a$$y served'pon the taxpayer. (Sec& 0 (A), NIRC)& h's i" the amended ret'rn has &een "i$ed on$ya"ter the iss'ance o" the Getter o" /'thority "or the investigation or in the co'rse o" said investigation% the 0 civi$ pena$ty sha$$ &e app$ied. (Sec& '&2&2, Re%& Reg!& No& -2*//)

COURT OF TA> APPEALSUnder RA NO% ?? /A''roved March @4, ?4435

he ran( was e$evated to the $eve$ o" a co$$egiate co'rt with specia$ @'risdiction% and a new

division was created. Same $eve$ as the !o'rt o" /ppea$s% possessing a$$ the inherent powers o" a !o'rt o" ='stice

!onsists o" a <residing ='stice and "ive C /ssociate ='stices

#ay sit en #anc or in two 2C >ivisions% each division consisting o" three 3C ='stices. ,o'r

C ='stices sha$$ constit'te a 8'or'm "or sessions en #anc and two 2C ='stices "or sessionso" a >ivision.

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he a""irmative votes o" "o'r C mem&ers o" the !o'rt en #anc or two 2C mem&ers o" a

>ivision% as the case may &e% sha$$ &e necessary "or the rendition o" a decision orreso$'tion.

E)'anded 2"risdiction

I% E)c+"sive a''e++ate 7"risdiction to revie( !# a''ea+aC >ecisions o" the Commi!!ioner o Internal Re%enue

1C in cases invo$ving disp'ted assessments% re"'nds o" interna$ reven'e taxes% "eesor other charges% pena$ties in re$ation thereto%

2C or other matters arising 'nder the H-! or other $aws administered &y the B-O&C -naction &y the Commi!!ioner o Internal Re%enue

1C in cases invo$ving disp'ted assessments% re"'nds o" interna$ reven'e taxes% "eesor other charges% pena$ties in re$ation thereto%

2C or other matters arising 'nder the H-! or other $aws administered &y the B-%

where the H-! provides a speci"ic period "or action% in which case the inactionsha$$ &e deemed a denia$O

cC >ecisions% orders or reso$'tions o" the RC R in $oca$ tax cases origina$$y decided or reso$ved &y them in the exercise o"

their origina$ or appe$$ate @'risdictionOdC >ecisions o" the Commi!!ioner o Cu!tom!

1C in cases invo$ving $ia&i$ity "or c'stoms d'ties% "ees or other money charges%sei're% detention or re$ease o" property a""ected% "ines% "or"eit'res or otherpena$ties in re$ation thereto%

2C or other matters arising 'nder the !'stoms Gaw or other $aws administered &ythe B'rea' o" !'stomsO

eC >ecisions o" the Central Board o A!!e!!ment Appeal! R in the exercise o" its appe$$ate @'risdiction over cases invo$ving the

assessment and taxation o" rea$ property origina$$y decided &y the provincia$ or city&oard o" assessment appea$sO

"C >ecisions o" the Secretary o ?inance R on c'stoms cases e$evated to him a'tomatica$$y "or review "rom decisions o"

the !ommissioner o" !'stoms which are adverse to the Jovernment 'nder Section231 o" the ari"" and !'stoms !odeO

gC >ecisions o" the Secretary o rade and Indu!try in the case o" nonagric'$t'ra$prod'ct% commodity or artic$e% and the Secretary o Agriculture in the case o" agric'$t'ra$ prod'ct% commodity or artic$e%

R invo$ving d'mping and co'ntervai$ing d'ties 'nder Secs. 301and 302%respective$y% o" the ari"" and !'stoms !ode% and sa"eg'ard meas'res 'nder / Ho%))00% where either party may appea$ the decision to impose or not to impose saidd'ties.

II% 2"risdiction over cases invo+vin cri*ina+ casesaC Exclu!i%e original @'risdiction over a$$ crimina$ cases arising "rom vio$ations o" the

H-! or ari"" and !'stoms !ode and other $aws administered &y the B- or theB'rea' o" !'stoms Where the principa$ amo'nt o" taxes and "ees% exc$'sive o" charges and

pena$ties c$aimed is $ess than one mi$$ion pesos <1%000%000.00C or where thereis no speci"ied amo'nt c$aimed R the o""enses or pena$ties sha$$ &e tried &y theregular court! and the @'risdiction o" the !/ sha$$ &e appe$$ate.

/ny provision o" $aw or the '$es o" !o'rt to the contrary notwithstanding% the

crimina$ action and the corresponding civi$ action "or the recovery o" civi$$ia&i$ity "or taxes and pena$ties sha$$ at a$$ times &e sim'$taneo's$y instit'ted

with% and @oint$y determined in the same proceeding &y the !/% the "i$ing o" the crimina$ action &eing deemed to necessari$y carry with it the "i$ing o" thecivi$ action% and no right to reserve the "i$ing o" s'ch civi$ action separate$y"rom the crimina$ action wi$$ &e recognied.

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&C Exclu!i%e appellate @'risdiction in crimina$ o""enses1C 4ver appea$s "rom the @'dgments% reso$'tions or orders o" the ! in tax cases

origina$$y decided &y them% in their respective territoria$ @'risdiction.2C 4ver petitions "or review o" the @'dgments% reso$'tions% or orders o" the ! in

the exercise o" their appe$$ate @'risdiction over tax cases origina$$y decided &ythe #etropo$itan ria$ !o'rts% #'nicipa$ ria$ !o'rts% and #'nicipa$ !irc'it ria$!o'rts in their respective @'risdiction.

III% 2"risdiction over ta) co++ection casesaC Exclu!i%e original @'risdiction in tax co$$ection cases invo$ving "ina$ and exec'tory

assessments "or taxes% "ees% charges and pena$ties.

-n co$$ection cases where the principa$ amo'nt o" taxes and "ees% exc$'sive o"

charges and pena$ties% c$aimed is $ess than one mi$$ion pesos <1%000%000.00C Rsha$$ &e tried &y the proper Municipal rial Court% Metropolitan rial Court%and Regional rial Court.

&C Exclu!i%e appellate @'risdiction in tax co$$ection cases1C 4ver appea$s "rom the @'dgments% reso$'tions or orders o" ! in tax co$$ection

cases origina$$y decided &y them% in their respective territoria$ @'risdiction.2C 4ver petitions "or review o" the @'dgements% reso$'tions or orders o" the ! in

the exercise o" their appe$$ate @'risdiction over tax co$$ection cases origina$$ydecided &y the #etropo$itan ria$ !o'rts% #'nicipa$ ria$ !o'rts and #'nicipa$!irc'it ria$ !o'rts% in their respective @'risdiction.

FFF in crimina$ and co$$ection cases% the Jovernment may direct$y "i$e the said caseswith the !/ covering amo'nts within its exc$'sive and origina$ @'risdiction.

Modes o$ A''ea+1C By "i$ing a petition "or review 'nder a proced're ana$ogo's to that provided "or 'nder

'$e 2 o" 1++ '$es on !ivi$ <roced're• decision% r'$ing% or inaction o" the Commi!!ioner o Internal Re%enue%

Commi!!ioner o Cu!tom!% the Secretary o ?inance% the Secretary o rade and Indu!try or the Secretary o Agriculture or the Regional rial Court!

• this appea$ sha$$ &e heard &y a >ivision o" the !/

2C By "i$ing a petition "or review 'nder a proced're ana$ogo's to that provided "or 'nder'$e 3 o" 1++ '$es on !ivi$ <roced're

• decisions or r'$ings o" the Central Board o A!!e!!ment! Appeal! and the Regional

rial Court! in the exercise o" its a ppellate @'risdiction

• this appea$ sha$$ &e heard &y the !/ en &anc.

Proced"re9

1. he appea$ sha$$ &e "i$ed with the !/ within thirty 30C days a"ter thereceipt o" s'ch decision or r'$ing or a"ter the expiration o" the period "ixed &y $aw "ors'ch action.

2. / party adverse$y a""ected &y a r'$ing% order or decision o" a >ivision o" the !/ may "i$e a motion "or reconsideration or new tria$ &e"ore the same >ivisionwithin 1 days "rom notice.

3. / party adverse$y a""ected &y a reso$'tion o" a >ivision o" the !/ on amotion "or reconsideration or new tria$ may "i$e a petition "or review with the !/ en&anc.

. / party adverse$y a""ected &y a decision or r'$ing o" the !/ en &ancmay "i$e with the S'preme !o'rt a veri"ied petition "or review on certiorari p'rs'ant to'$e o" the 1++ '$es on !ivi$ <roced're.

-n cases where the B- have not decided on the protest a"ter 1)0 days and an appea$

has &een "i$ed with the !/% the B- can not $ater decide on the protest since 'nder'$es 2 and 3 o" the '$es o" !o'rt% the B- has on$y resid'a$ @'risdiction over thecase a"ter the appea$ has &een made.

S A N 0 1 2 A C 3 L L 1 G 1 3 (

L A 4

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E$$ect o$ A''ea+Ho appea$ ta(en to the !/ sha$$ s'spend the payment% $evy% distraint% andMor sa$e o" any

property o" the taxpayer "or the satis"action o" his tax $ia&i$ity as provided &y existing $aw.

o(ever, when in its opinion the co$$ection may @eopardie the interest o" the governmentandMor the taxpayer% the !/ may s'spend the said co$$ection and re8'ire the taxpayer either todeposit the amo'nt c$aimed or to "i$e a s'rety &ond "or not more than do'&$e the amo'nt with the!o'rt.

REDNOTES

INTA>ATIO

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