TAXATION LAW J.

DEL CASTILLO DOCTRINES

Capital Gains Tax. It is settled that the transfer of property through expropriation proceedings is a
sale or· exchange within the meaning of Sections 24(D) and 56(A) (3) of the National Internal
Revenue Code, and profit from the transaction constitutes capital gain. Since capital gains tax
is a tax on passive income, it is the seller, or respondents in this case, who are liable to shoulder
the tax. REPUBLIC vs. SPS. SALVADOR ( GR No. 205428,June 7, 2017)

Exception from income tax. For an institution to be completely exempt from income tax, Section
30(E) and (G) of the 1997 NIRC requires said institution to operate exclusively for charitable or
social welfare purpose. But in case an exempt institution under Section 30(E) or (G) of the said
Code earns income from its for-profit activities, it will not lose its tax exemption. However, its
income from for-profit activities will be subject to income tax at the preferential 10% rate
pursuant to Section 27(B) thereof. Commissioner of Internal Revenue vs. St. Luke’s Medical
Center, Inc. (G.R. No. 203514; February 13, 2017)

VAT-exempt or Zero-rated Sale under EPIRA LAW. To be entitled to a refund or credit of

unutilized input VAT attributable to the sale of electricity under the EPIRA, a taxpayer must establish
that it is a generation company and that it derived sales from power generation.

There is nothing in the JSFI to show that the parties agreed that TPC is a generation company
under the EPIRA.

The parties did not stipulate that TPC is a generation company. They only stipulated that TPC is
engaged in the business of power generation and that it filed an application with the ERC on
June 20, 2002. However, being engaged in the business of power generation does not make TPC
a generation company under the EPIRA. Neither did TPC’s filing of an application for COC with
the ERC automatically entitle TPC to the rights of a generation company under the EPIRA. A
generation facility is defined as a facility for the production of electricity while a generation
company refers to any person or entity authorized by the ERC to operate facilities used in the
generation of electricity. The latter is authorized by the ERC to operate, as evidenced by a COC.
COMMISSIONER OF INTERNAL REVENUE VS TOLEDO POWER COMPANY; TOLEDO POWER
COMPANY VS COMMISSIONER OF INTERNAL REVENUE (G.R. No. 196415/G.R. No. 196451;
December 2, 2005)

Documentary stamp tax. Section 196 of the National Internal Revenue Code (NIRC) does not
cover all transfers and conveyances of real property for a valuable consideration. Said provision
pertains only to sale transactions where real property is conveyed to a purchaser for a
consideration by the phrase "granted, assigned, transferred or otherwise conveyed" qualified by
the word "sold.” The words "sold", "purchaser" and "consideration" undoubtedly pertains only to
sale of real property.

Thus, petitioner obviously erred when it relied on the phrase "granted, assigned, transferred or
otherwise conveyed" in claiming that all conveyances of real property regardless of the manner
of transfer are subject to documentary stamp tax under Section 196. It is not proper to construe
the meaning of a statute on the basis of one part. COMMISSIONER OF INTERNAL REVENUE vs. LA
TONDEÑA DISTILLERS, INC. (LTDI) [Now GINEBRA SAN MIGUEL ( G.R. No. 175188, July 15, 2015)
In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a
Certification issued by the BIR to prove that it availed of the Tax Abatement Program and paid
the basic tax. It also attached copies of its BIR Tax Payment Deposit Slips and a Jetter issued by
RDO Nacar. These documents, however, do not prove that Asiatrust's application for tax
abatement has been approved. If at all, these documents only prove Asiatrust's payment of
basic taxes, which is not a ground to consider its deficiency tax assessment closed and
terminated. ASIA TRUST vs. CIR (GR No. 201530, April 19, 2017)

Tax Abatement; Termination Letter Required. Based on the guidelines, the last step in the tax
abatement process is the issuance of the termination letter. The presentation of the termination
letter is essential as it proves that the taxpayer's application for tax abatement has been
approved. Thus, without a termination letter, a tax assessment cannot be considered closed and
terminated.