Case 1 ABS-CBN Broadcasting Corp. vs.

Court of Tax Appeals Facts: During the period pertinent to this case, petitioner corporation was engaged in the business of telecasting local as well as foreign films acquired from foreign corporations not engaged in trade or business within the Philippines. for which petitioner paid rentals after withholding income tax of 30%of one-half of the film rentals. In implementing Section 4(b) of the Tax Code, the Commissioner issued General Circular V-334. Pursuant thereto, ABS-CBN Broadcasting Corp. dutifully withheld and turned over to the BIR 30% of of the film rentals paid by it to foreign corporations not engaged in trade or business in the Philippines. The last year that the company withheld taxes pursuant to the Circular was in 1968. On 27 June 1908, RA 5431 amended Section 24 (b) of the Tax Code increasing the tax rate from 30% to 35% and revising the tax basis from such amount referring to rents, etc. to gross income. In 1971, the Commissioner issued a letter of assessment and demand for deficiency withholding income tax for years 1965 to 1968. The company requested for reconsideration; where the Commissioner did not act upon. Issue: Whether Revenue Memorandum Circular 4-71, revoking General Circular V-334, may be retroactively applied. Held: Rulings or circulars promulgated by the Commissioner have no retroactive application where to so apply them would be prejudicial to taxpayers. Herein ,the prejudice the company of the retroactive application of Memorandum Circular 4-71 is beyond question. It was issued only in 1971, or three years after 1968, the last year that petitioner had withheld taxes under General Circular No. V-334. The assessment and demand on petitioner to pay deficiency withholding income tax was also made three years after 1968 for a period of time commencing in 1965. The company was no longer in a position to withhold taxes due from foreign corporations because it had already remitted all film rentals and had no longer control over them when the new circular was issued. Insofar as the enumerated exceptions are concerned, the company does not fall under any of them.

Case 2 COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS G.R. No. 115349 April 18, 1997 Facts: ADMU Institute of Philippine Culture is engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. On July 1983, CIR sent a demand letter assessing the sum of P174,043.97 for alleged deficiency contractors tax. Accdg to CIR, ADMU falls under the purview of independent contractor pursuant to Sec 205 of Tax Code and is also subject to 3% contractors tax under Sec 205 of the same code. (Independent Contractor means any person whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractors or their employees.) Issue: 1) WON ADMU is an independent contractor hence liable for tax? NO. 2) WON the acceptance of research projects by the IPC of ADMU a contract of sale or a contract for a piece of work? NEITHER. Held: 1)

Hence, to impose the three percent contractors tax on Ateneos Institute of Philippine Culture, it should be sufficiently proven that the private respondent is indeed selling its services for a fee in pursuit of an independent business. 2) Records do not show that Ateneos IPC in fact contracted to sell its research services for a fee. In the first place, the petitioner has presented no evidence to prove its bare contention that, indeed, contracts for sale of services were ever entered into by the private respondent. Funds received by the Ateneo de Manila University are technically not a fee. They may however fall as gifts or donations which are tax-exempt. Another fact that supports this contention is that for about 30 years, IPC had continuously operated at a loss, which means that sponsored funds are less than actual expenses for its research projects. In fact, private respondent is mandated by law to undertake research activities to maintain its university status. In fact, the research activities being carried out by the IPC is focused not on business or profit but on social sciences studies of Philippine society and culture. Since it can only finance a limited number of IPCs research projects, private respondent occasionally accepts sponsorship for unfunded IPC research projects from international organizations, private foundations and governmental agencies. However, such sponsorships are subject to private respondents terms and conditions, among which are, that the research is confined to topics consistent with the private respondents academic agenda; that no proprietary or commercial purpose research is done; and that private respondent retains not only the absolute right to publish but also the ownership of the results of the research conducted by the IPC. Case 3

CIR V. CA, CTA, & Fortune Tobacco

(BIR Rules and Regulations) Facts: CIR, through RMC 37-93, aims to collect deficiencies on ad valorem taxes against Fortune Tobacco following a reclassification of foreign branded cigarettes, as per RA 7654. Fortune Tobacco raised the issue of the propriety of the assessment to the CTA, which decided against the CIR. CTA was affirmed by CA. ISSUE: Is RMC 37-93 a mere interpretative ruling, therefore not requiring, for its effectivity, hearing and filing with the UP Law Center? NO. Ratio Decidendi: 1. When an administrative rule is merely interpretative, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. 2. When, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. 3. A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular cannot be viewed simply as a corrective measure or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. 4. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes which at the time of its effectivity were not so classified as bearing foreign brands. (Prior to the issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion" cigarettes were in the category of locally manufactured cigarettes not bearing foreign brand subject to 45% ad valorem tax.) 5. Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products. 6. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. 7. In so doing, the BIR not simply intrepreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. Holding: CTA, CA affirmed.

Case 4 CIR v. Benguet Corp G.R. Nos. 134587 and 134588; January 8, 2005 Facts: Benguet Corporation is a domestic corporation engaged in the exploration, development and operation of mineral resources, and the sale or marketing thereof to various entities. It is a VAT registered enterprise. The transactions in question occurred during the period between 1988 and 1991. Under Sec. 99 of NIRC as amended by E.O. 273 s. 1987 then in effect, any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or engages in similar transactions and any person who imports goods is liable for output VAT at rates of either 10% or 0% (zero-rated) depending on the classification of the transaction under Sec. 100 of the NIRC. In January of 1988, Benguet applied for and was granted by the BIR zero-rated status on its sale of gold to Central Bank. On 28 August 1988 VAT Ruling No. 3788-88 was issued which declared that the sale of gold to Central Bank is considered as export sale subject to zero-rate pursuant to Section 100 of the Tax Code, as amended by EO 273. Relying on its zero-rated status and the above issuances, Benguet sold gold to the Central Bank during the period of 1 August 1989 to 31 July 1991 and entered into transactions that resulted in input VAT incurred in relation to the subject sales of gold. It then filed applications for tax refunds/credits corresponding to input VAT. However, such request was not granted due to BIR VAT Ruling No. 008-92 dated 23 January 1992 that was issued subsequent to the consummation of the subject sales of gold to the Central Ban`k which provides that sales of gold to the Central Bank shall not be considered as export sales and thus, shall be subject to 10% VAT. BIR VAT Ruling No. 008-92 withdrew, modified, and superseded all inconsistent BIR issuances. Both petitioner and Benguet agree that the retroactive application of VAT Ruling No. 008-92 is valid only if such application would not be prejudicial to the Benguet pursuant Sec. 246 of the NIRC. Issues: (1) WON Benguets sale of gold to the Central Bank during the period when such was classified by BIR issuances as zerorated could be taxed validly at a 10% rate after the consummation of the transactions involved; (2) WON there was prejudice to Benguet Corp due to the new BIR VAT Ruling. Held: (1) NO. At the time when the subject transactions were consummated, the prevailing BIR regulations relied upon by Benguet ordained that gold sales to the Central Bank were zero-rated. Benguet should not be faulted for relying on the BIRs interpretation of the said laws and regulations. While it is true, as CIR alleges, that government is not estopped from collecting taxes which remain unpaid on account of the errors or mistakes of its agents and/or officials and there could be no vested right arising from an erroneous interpretation of law, these principles must give way to exceptions based on and in keeping with the interest of justice and fair play. (then the Court cited the ABS-CBN case). (2) YES. The adverse effect is that Benguet Corp became the unexpected and unwilling debtor to the BIR of the amount equivalent to the total VAT cost of its product, a liability it previously could have recovered from the BIR in a zero-rated scenario or at least passed on to the Central Bank had it known it would have been taxed at a 10% rate. Thus, it is clear that Benguet suffered economic prejudice when it consummated sales of gold to the Central

Bank were taken out of the zero-rated category. The change in the VAT rating of Benguets transactions with the Central Bank resulted in the twin loss of its exemption from payment of output VAT and its opportunity to recover input VAT, and at the same time subjected it to the 10% VAT sansthe option to pass on this cost to the Central Bank, with the total prejudice in money terms being equivalent to the 10% VAT levied on its sales of gold to the Central Bank. Even assuming that the right to recover Benguets excess payment of income tax has not yet prescribed, this relief would only address Benguets overpayment of income tax but not the other burdens discussed above. Verily, this remedy is not a feasible option for Benguet because the very reason why it was issued a deficiency tax assessment is that its input VAT was not enough to offset its retroactive output VAT. Indeed, the burden of having to go through an unnecessary and cumbersome refund process is prejudice enough.

Case 6 PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. (PLDT) vs. CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as City Treasurer of Davao GR. No. 143867, March 25, 2003 Facts: PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid in lieu of all taxes on this franchise or earnings thereof pursuant to RA 7082. The exemption from all taxes on this franchise or earnings thereof was subsequently withdrawn by RA 7160 (LGC), which at the same time gave local government units the power to tax businesses enjoying a franchise on the basis of income received or earned by them within their territorial jurisdiction. The LGC took effect on January 1, 1992. The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides: Notwithstanding any exemption granted by law or other special laws, there is hereby imposed a tax on businesses enjoying a franchise, a rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the income receipts realized within the territorial jurisdiction of Davao City. Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation (Globe) and Smart Information Technologies, Inc. (Smart) franchises which contained in leiu of all taxes provisos. In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which provides that any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises. The law took effect on March 16, 1995. In January 1999, when PLDT applied for a mayors permit to operate its Davao Metro exchange, it was required to pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the power of the city government to collect the local franchise tax and demanded a refund of what had been paid as a local franchise tax for the year 1997 and for the first to the third quarters of 1998. Issue: Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of the local franchise tax in view of the grant of tax exemption to Globe and Smart. Held: Petitioner contends that because their existing franchises contain in lieu of all taxes clauses, the same grant of tax exemption must be deemed to have become ipso facto part of its previously granted telecommunications franchise. But the rule is that tax exemptions should be granted only by a clear and unequivocal provision of law expressed in a language too plain to be mistaken and assuming for the nonce that the charters of Globe and of Smart grant tax exemptions, then this runabout way of granting tax exemption to PLDT is not a direct, clear and unequivocal way of communicating the legislative intent.

Nor does the term exemption in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption from regulations and requirements imposed by the National Telecommunications Commission (NTC). For instance, RA 7925, Sec. 17 provides: The Commission shall exempt any specific telecommunications service from its rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates of tariffs. Another exemption granted by the law in line with its policy of deregulation is the exemption from the requirement of securing permits from the NTC every time a telecommunications company imports equipment. Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain to be mistaken.